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Most securitization investors plan to boost activity within next 12 months

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Three out of five asset-backed and mortgage-backed securities investors plan to increase their activity in the securitization space within the next 12 months, according to a survey from structured finance technology firm Principia Partners. The survey drew in 500 senior securitization market participants from 200 organizations from the United States and Europe between June and September 2010 and asked about the overall challenges to market recovery and impediments to increasing investor and issuer confidence. 60% said they feel confident enough to begin upping investments in the space. Furthermore, the participants expect a much stronger securitization market in 2012 (see chart below): 75% of investors ranked the consolidated risk surveillance and collateral pool performance as their top two risk management concerns. And 55% stated they are unable to address these concerns. 72% of investors also said they were ineffective at establishing and monitoring hard and soft triggers related to structured finance assets. 90% said technology could likely help in mitigating these troubles. “Investors are cognizant of new due diligence requirements and their need to address the shortfalls in analytical, risk management and operational practices before new rules are enforced in 2011," said Douglas Long, EVP of business strategy at Principia. The most important objective identified by investors was timely access and effective integration of collateral pool performance data for investment and risk analysis. This was followed by the effective modeling of deal waterfall structures and cashflows for all the assets managed within a given portfolio. The survey cites the drive in the US and Europe to standardize the type, frequency and delivery of securitization information, provided by issuers, as a vital step to establishing confidence in future issuance. However, the industry does not have a uniform means of doing so. "Currently, standard templates do not exist for the disclosure of bond issuance information across asset classes, although industry bodies such as the American Securitization Forum and Association for Financial Markets in Europe have progressed work on standard formats for RMBS," the survey states. Write to Jacob Gaffney.

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