There is a scarcity of investors at this year’s ABS East conference hosted by Information Management Network.
Although headcount was up by 30% from 2010 attendance, fewer of them are from the buyside. And among those at the event, only a handful said they would commit money to the market in the near term.
Still at the heart of the problem is the profound uncertainty gripping several areas of the securitization market.
“There are a few things affecting the growth of ABS issuance,” said Bob Behal, co-head of ABS/CMBS investments at Vanguard Group, speaking at the event on Monday. “Take residential loan growth out of the equation and you still see slower loan growth in other areas and when you do see it, the issuance is happening in other markets.”
Behal said that the lack of loan growth has even affected the auto sector, where issuers are increasingly turning to other sources of financing.
He added that also telling was the fact that the conference has so little investor participation, which mirrors the lack of investor demand in the market today.
“Look at what is happening from a ratings perspective,” said Kris Kraus, executive vice-president at PIMCO. “A lot of people outsourced rating process to rating agency.” According to Kraus some of these smaller buyside players don’t have the same capabilities as bigger players to conduct in house due diligence at the level needed to estimate risk.
Amherst Holdings Chief Executive Officer Sean Dobson, who also spoke at the event, said the securitization industry cannot become a viable source of financing again until lingering problems are sorted out.