Category: Capital Relief Trades
Mark Fontanilla & Company (MF&Co), founded in Charlotte, North Carolina, in 2017, provides a host of financial market advisory and consultancy services. The CRTx Total Return Index and its associated data/analytics suite is the firm’s flagship offering.
Unveiled in April 2018, the CRTx is the first and, as yet the only, commercial index that tracks the daily total return performance of all outstanding benchmark CRT at-issuance securities issued by Fannie Mae and Freddie Mac. “I perceived a gap in the market and set out to fill that gap. The GSE CRT market was one of the newest US bond market sectors and, unlike other major financial market segments, it did not have an independently administered, cash-based total return index to track and compare sector performance,” explains Fontanilla.
The suite of indices comprises the CRTx Aggregate and a series of sub-indices, including the CRTx Upper Mezzanine, the CRTx Lower Mezzanine and the CRTx Subordinate, as well as annual deal vintage sub-indices. The CRTx Index suite gives the market a much-needed tool for the benchmarking and decomposition analysis of performance across the GSE CRT sector, allowing comparison and portfolio optimisation testing relative to other fixed income sectors.
The value of these indices was underlined during the period of acute Covid-19 related market dislocation in the spring of 2020. The CRTx was the only publicly visible index that provided a clear view of the GSE CRT market in toto, but also of the comparative performance of different tranches and vintages of GSE-issued CRT securities.
Fontanilla’s firm also offers a range of financial, operational and strategic solutions that combine advanced analytics and human intelligence - but it is the human aspect that is deemed the firm’s hallmark. This is in stark contrast to some of MF&Co’s competitors, perhaps, and it is seen as one of the firm’s chief differentiating qualities.
“Instead of concentrating on data and models alone, we emphasise the human intelligence aspect. This is the primary value-added feature of MF&Co. We believe a human expert should be telling a model what to do, rather than a model telling the human expert what to do,” stresses Fontanilla.
That human element is supplied by Fontanilla and his five colleagues at MF&Co, who have a rich financial services background. He brings over 20 years of experience in bond markets, mortgage finance, fixed income research and strategic advisory services to the table.
Before starting his own firm, he was a senior fixed income marketing strategist at Fannie Mae, which included specific involvement in the CAS programme. Prior to joining Fannie Mae, he was a mortgage research analyst at Wells Fargo and also traded RMBS, CMBS and ABS at RBC.
Clients of MF&Co are chiefly large publicly traded firms and private companies, but there are investment funds and smaller local businesses on the roster as well. These clients receive strategic advice and solutions based on both proprietary methods and in-house analytic tools that decompose and benchmark risk and reward.
“We don’t only look at the range of risks for an investment or company, but also whether that risk is worth the spectrum of rewards you may receive,” says Fontanilla.
The firm’s ambit of expertise covers US bond and rates markets, as well consumer finance, but its sweet spot is US mortgages, structured finance and complex securities. These are the key areas in which MF&Co’s skills and knowledge are most abundant, and where it can best help clients to develop strategies that make a difference.
The firm’s staff knows what investors are looking for and what questions need to be asked, they know how to assess the dynamics of a given market and they know how to determine the different risk/reward profiles of different strategies, explains Fontanilla. In an era in which ever greater fields of data and more powerful technology are seemingly prized above all else, it is refreshing to find that Fontanilla resides his faith in the fundamental power of human intelligence and the capacity to deploy that wisely.
“Ultimately, financial analytic tools and models are only as good as their creators,” he says.
Honourable mention: Open Source Investor Services
Greek goddess Athena was an uncompromising lady who sprang from the head of Zeus full-grown; she wasn’t to be messed with.
One trusts that the powers that be at Open Source Investor Services (OSIS), a Dutch fintech founded in 2010, were versed in classical mythology when it named its pioneering credit risk transfer analysis tool after the eponymous warrior princess. If so, it’s a bold statement of intent.
Athena - the credit risk transfer tool, not the goddess - takes the perspective of both the originator and investor to show the performance of a CRT deal as it operates under different types of economic conditions and under different types of regulation. It is used by brokers, investors, asset managers and structurers.
For complete coverage of SCI’s 2020 CRT Awards, click here.