Peter Jasko, ceo at Semeris, answers SCI's questions

Q: How and when did you become involved in the securitisation market?

A: Semeris launched last month (SCI 4 November), but I started getting involved in securitisation and CLOs in particular in 2001. I had been involved in the credit derivatives market for a couple of years prior to that, looking at basket trades and cranking the numbers on those.

When I was structuring deals at Credit Suisse and JPMorgan, it always struck me that legal documents were hard to  read, they were lengthy and always a pain point for me – usually losing a Sunday afternoon and evening going through these documents! I had a bit of a tech background, having started my career in the sector, and it seemed to me there had to be a better way of dealing with docs. But at the time, what was available wasn’t fully up to the job.

In the end, I left the banking world and went back to tech, launching a couple of other start-ups. But that thought about improving the process around legal documentation was always at the back of my mind. When I exited my previous start-up in consumer finance at the end of last year and was deciding what to do next, it became clear that it was a natural time to come back into the CLO space and launch Semeris.

The technology we’re now using – artificial intelligence (AI) and natural language processing (NLP) – has come on a long way since I was in banking and so it’s something that can now be made to work. A lot of the technologies are there and they’re a lot cheaper than they used to be and a lot easier to use.

But still people don’t necessarily want to be given a tool-kit and be told ‘we can do the analysis for you, but here’s a bunch of consulting to make it work.’ So, we have had to take it on further and offer one complete package.

Q: What are the firm’s key areas of focus today?

A: We’re obviously doing a lot of research into AI and NLP, but we’re also doing a lot of work on the engineering side of the business to bring that raw tech in a usable format to our customers. Our overall focus is on analysing and making it easier to work with legal documentation in the capital markets and we are using European CLOs, followed by US CLOs, as our entry point into the space.

We look for docs that are long and complex, where we can add the most value in analysing them. We provide software and library data, so it’s a complete service where we help customers extract information, trace back where it’s come from to uncover value by making it easier to make judgments and pick out the nuggets of information they need - not just in one deal, but across, say, 20 or 30 deals or whatever they define their market as.

Q: How does the firm differentiate itself from its competitors?

A: There are a couple of firms out there doing similar things in adjacent markets in terms of helping customers understand what’s in their legal documentation. So we view them as competitors in that way, but they use lawyers to do the summarisation work, so are slower and their cost base is much higher than our tech-based approach.

Equally, the benefit of our approach is that we can provide a broader view across comparable deals, rather than focusing on just the docs for the one you are being asked to summarise. We are also building a back library, so users can compare how things have changed over time and across the market.

In addition, there are some competing firms that focus on the tech side and our difference to them is that we are providing a library of data as well. It’s packaged and ready to use; you don’t need to start training it up and teaching it how to look for things in the docs – it’s our job to do that for customers.

Q: What is your strategy going forward?

A: We first want to make sure that we’ve covered the CLO market properly and are doing a good job there. Once we’re comfortable with that, we’ll start to look at adjacent markets where it makes sense for us to enter.

We’ll be guided by where our clients want us to go, but are taking a close look at securitisation as a whole – CMBS, RMBS and related markets. Ultimately, we want to be able to build up a body of knowledge to be able to help people to look at more private transactions, but that’s a longer-term goal.

Q: Which challenges/opportunities do you anticipate in the future?

A: We’re a service provider and always dependent on how the market performs and at one level back at the beginning of the Covid crisis, there was a real concern that the leveraged loan and CLO market would implode - which would, of course, have presented a huge challenge. However, that’s not really panning out, even though some sectors have been hit very hard.

It’s typical of the three- to four- or four- to five-year cycle we’re used to seeing in credit anyway, where a few sectors are badly hit, so people rotate out of those sectors or they restructure the loans within their portfolios. Those who called it right to be lightweight in those sectors ahead of the pandemic have done alright, while those who were heavyweight have suffered. But by and large, the CLO market is still healthy and functioning, so that’s good for us as well.

At the same time, experience says that big shifts in economics or crises of one sort or another drive innovation and that’s where we see ourselves – in the innovation space looking at how we can help people use technology to become better and faster at digesting legal documents. Some things have even become easier during the pandemic, such as being able to secure time with people for a meeting. Obviously, people’s budgets are fairly constrained, but there is a greater openness to use technology to help make things more efficient and that’s where we see the opportunity.