Market updates and sector developments

Stratiphy and Chenavari Financial Group have joined forces to develop custom AI tools aimed at improving the quality of and mitigating the subjectivity within credit analysis. By harnessing the wealth of existing data and employing a range of AI techniques, the project aims to enhance efficiency, pricing capability and precision in forecasting within credit analysis.

Representatives of each company will collaborate to understand the specific challenges facing the credit industry, such as factor analysis, attribution and pricing of complex instruments, including CLOs. The project aims to incorporate cutting-edge AI technologies to solve these challenges in real-world situations in a way that enhances transparency, trustworthiness and widespread adoption.

The initiative is supported by UK Research and Innovation (UKRI) and administered by Innovate UK, a government sponsorship body that promotes industry innovation in key sectors. The project will be led by Dr John Cartlidge at the University of Bristol, providing AI and financial modelling expertise, and Professor Karen Elliott at the University of Birmingham, an expert in the trustworthy application of AI.

In other news…

Arrow inks Amitra acquisition
Arrow Global Group has acquired Amitra Capital from Canada Pension Plan Investment Board (CPP Investments). This acquisition significantly expands Arrow’s footprint in Spain and provides a foundation for future collaboration with CPP Investments, focusing on both current and prospective investment opportunities. CPP Investments retains its current direct economic interest in all of the portfolios managed by Amitra Capital.

With assets under management totalling over €4bn, Amitra Capital specialises in managing European NPLs and real estate investments. The acquisition includes a new five-year servicing agreement between Arrow and CPP Investments. Key management personnel from Amitra Capital will continue to lead the company, ensuring continuity and stability in operations under Arrow.

DC rules set for overhaul
Linklaters has completed an independent review of the structure and governance of the Credit Derivatives Determinations Committees (DCs). The review – which was requested by ISDA - covers the composition, functioning, governance and membership of the DCs (SCI 14 December 2023).

The report makes several recommendations about the changes that could be made to improve the structure of the DCs, such as ameliorating concerns about conflicts of interest by DCs having an independent chairman and up to two other independent members and/or DCs having the ability to refer decisions to an independent panel for resolution. Other recommendations include: the DC rules requiring the provision of reasons for all material decisions; the creation of a governance body with responsibility for overseeing the way the DCs carry out their functions; and an overhaul of the existing funding model to ideally involve a transaction-based levy.

Following a public consultation on the Linklaters recommendations, ISDA will work with its members to propose specific changes to implement any measures that receive broad public support. ISDA will then recommend these solutions to the DCs, which are solely responsible for agreeing and implementing any changes.

Corinne Smith