Sector developments and company hires

CLO business announced

AllianceBernstein has announced a new loan and CLO management business, hiring Scott Macklin to lead the effort. Macklin was previously head of research in Och-Ziff’s credit business and the new firm will be initially funded with investments from AXA Equitable Life Insurance Company, expanding on the existing relationship between AB and AXA Equitable Holdings.

ILS fund launch announced

Markel CATCo Investment Management has confirmed that Rick Montgomerie and Charlie Vaughan, the portfolio managers for its Aquilo Fund, will be leaving the company with the intention of establishing a new investment manager and fund - Chard Re Investment Management (Chard Re). Elizabeth Simmons, the fund's underwriter, will also be leaving to join Chard Re, which is intended to launch 1 January, 2020. Markel Corporation intends to be a seed investor in Chard Re, subject to the fund reaching a specified level of invested capital and subject to finalising definitive agreements, and take a 12.5-17% ownership position.

The intention is for the assets and liabilities of the Aquilo Fund (existing business and side pockets) to be transferred to Chard Re, pending investor and regulatory approval. Chard Re will manage the Aquilo Fund run-off.

Indian ABS soaring

Crisil reports that the volume of securitisation transactions soared 48% on-year to Rs 1 lakh crore (approximately US$14bn) in the first half of fiscal 2020 as housing finance companies (HFCs) and non-banking finance companies (NBFCs) – together referred to as non-banks – resorted significantly to this route for fund-raising. Growth rode on both, established and new originators entering the market to augment their resources profile in a challenging financing environment. The number of active originators was close to 100 in the first half of this fiscal, compared with around 70 in the corresponding period of last fiscal.

Overall, growth was broad-based with both mortgage backed securitisation (MBS) and asset-backed securitisation (ABS) logging healthy uptick in volume. MBS volume rose 16% on-year, which is impressive given that some HFCs that were large originators last fiscal had limited transactions during the second quarter of this fiscal because of muted or negative growth in assets under management. In effect, the entry of new originators and the hunt for alternate source of funding, drove volume. The ABS segment saw volume zooming 69%, benefitting from a doubling in vehicle loan securitisation growth, and continued expansion of the asset class base.

Securitisation of gold loan receivables, personal loan receivables, two-wheeler loan receivables and lease rental receivables are now mainstream, with newer originators increasingly participating in such transactions. The volume of pass through certificates (PTCs), which remain the preferred route for ABS transactions, spurted 63% on-year. Consequently, the share of PTCs in total securitisation rose to 41% from 36% in fiscal 2019. Direct assignment (DA) volumes grew 39% on-year to Rs 59,000 crore.