Principia Partners has released the findings of its ABS, MBS and CDO Market Pricing Survey. The results reveal the range of methodologies and services investors use to obtain market pricing for structured finance and structured credit securities. However, while there are multiple data sources for investors, many challenges remain when managing the growing universe of information across their structured finance positions (see also SCI 6 June).

Over 100 senior securitisation market participants from 60 organisations took part in the study during May. Of the respondents, 93% purchased pricing data from independent pricing services (IPS) for secondary market price marks. More significantly, however, 60% of investors said that they had to access at least two IPS to obtain pricing across their ABS, MBS and CDO positions - with 16% stating they used four or more sources across their structured finance investments.

In addition, 58% of investors polled indicated that they still relied on dealer marks for pricing. In the current environment where investor due diligence is the mandated norm for investors, 64% of respondents said they evaluated pricing in-house, alongside their third-party sources.

One message was consistent throughout, Principia notes. While data quality and price transparency from third parties were vital to investors, the access and integration of data sources across an operation was fundamentally important. From an operational perspective, this was seen as key to managing and using information from multiple sources for effective portfolio management, risk oversight and accounting purposes.

Geographical differences exist between the IPS used by US and EU investors, as well as how these services were used, depending on exposure to EU- or US-issued assets. US investors used a broader range of providers than EU investors, according to the survey. Ten suppliers have at least a 15% share of US investors, compared with just five suppliers used to this degree by the EU investor base.

"For price determination alone, investors may use two to five pricing methodologies and data sources across their assets. That doesn't even scratch the surface of the range of data or tools required to then go and independently monitor the credit performance of deals, or monitor a portfolio of diverse assets, hedges and liabilities," states Douglas Long, evp business strategy at Principia.

He adds: "Ideally, investors want less data sources. The leading data suppliers are moving towards 'one-stop shop' data solutions, but investors need more than just the data. They need the operational infrastructure and workflow control to bring it all together for effective investment decisions, risk management and accounting."