Market updates and sector developments

Blockchain technology can reduce the yield spread on securitisations by approximately 25bp, according to a new BIS Working Paper. Based on an analysis of circa 5,000 ABS products issued in China between 2015 and 2020, the study examines whether blockchain-based ABS enjoy better pricing than those not based on blockchain.

Specifically, the study analyses whether the adoption of blockchain technology improves efficiency and transparency of financial transactions; whether the potential weak governance in terms of social interactions among participants generates an illusionary sense of reliability; and whether the market can understand such complexity and price it in. The paper explores how blockchain ABS products compare with traditional ABS products and whether differences in the design and governance of permissioned blockchain, as well as the relationship among participants in the issuance of ABS, affect the valuation and performance of ABS products.

In China, blockchain has been used at various stages in the securitisation process since 2017. Overall, the study implies that adopting blockchain appears to be beneficial in terms of improving the efficiency and transparency of ABS trading in the country. However, the benefit is heterogeneous across different institutional arrangements and asset classes.

For example, blockchain adoption seems more valuable for China Securities Regulatory Commission (CSRC)-regulated ABS products – such as consumer loan or account receivables securitisation – potentially due to information asymmetry. Relatively speaking, CSRC-regulated ABS products are less standardised and more opaque than RMBS, for instance.

In other news…

Medalist integrates Semper team
Medalist Partners and Semper Capital Management have expanded their partnership in the structured credit space (SCI 14 November 2022), with Medalist formally announcing plans to integrate the Semper Capital business onto its platform. As part of this process, various Semper Capital investment and support personnel will join Medalist, where they will manage their existing strategies with the enhanced resources of the Medalist platform, while continuing to leverage the robust investment process developed within Semper Capital over the past 30 years. The integration provides significant investment and operational support to the Semper Capital team and further bolsters the breadth and scale of Medalist’s structured credit and private credit platform.

Under the integration, Semper Capital ceo Greg Parsons, cio and portfolio manager Thomas Mandel and other senior Semper Capital professionals will join Medalist. Mandel will continue leading the investment activities of Semper Capital’s strategies along with Greg Richter, ceo and portfolio manager at Medalist. Together, they will continue to draw upon the broader investment and institutional resources of the Medalist platform to execute on significant opportunities in the structured credit market.

Headquartered in New York, Medalist is led by partners Richter, Michael Ardisson and John Slonieski, who previously led Credit Suisse’s global specialty finance and securitisation business. Following this transition, Medalist and its affiliates are expected to manage approximately US$3bn in assets under management.