Evaluating the evaluations vendors

Monday, January 8, 2018 | By Eric Reichenberg and Carl Tichler

Evaluating the evaluations vendors

For the fourth consecutive year, SS&C GlobeOp conducted an extensive study of several fixed income and bank loan valuation services. The purpose of this study is to help our clients assess pricing sources to support their vendor selection and due diligence processes.  The vendor services profiled include: ICE Data Service (aka IDC), Bloomberg BVAL, IHS Markit, Thomson Reuters, Advantage Data, Best Credit Data and Cambridge Financial Information Services.

The study focuses on two of the most important distinguishing characteristics for selection of evaluation vendors: market coverage and market alignment. Market coverage refers to the amount of securities and instrument types for which a vendor provides pricing services. Market alignment refers to the difference between the transaction prices and the vendor’s prices. These characteristics are indicative of relative ‘completeness and accuracy’ of the vendors’ pricing services.

The analysis relied on a statistically comprehensive data set of about 70,000 trade prices observed over a three month period. The trades included approximately 29,000 unique fixed income securities categorized into 31 instrument types, and over 2.3 million end-of-day evaluations from the vendors. 

Below is a small sample of the observations from this study:

Coverage Analysis Results

  • IHS Markit, ICE Data Services and BVAL had statistically equivalent pricing coverage.
  • All evaluation services, excluding Best Credit and Advantage Data, demonstrated nearly universal coverage (>95%) for US government securities. Bloomberg BVAL and Thomson Reuters provided the broadest coverage for sovereign bonds, both investment grade and high yield.
  • Bloomberg BVAL had the highest percentage coverage in all nine corporate bond categories. Six out of the seven vendors exhibit high coverage across a wide spectrum of corporate fixed income instruments.
  • IHS Markit led in pricing coverage for syndicated bank loans, but ICE Data Services and Bloomberg BVAL demonstrated significantly high coverage ratios, as well.

Market Alignment Analysis

  • ICE Data Services and Bloomberg BVAL overall had the best market alignment performance across all instrument classes.
  • BVAL performed best across the corporate bond categories; ICE Data Services produced the highest weighted average score across mortgage and structured instruments.
  • ICE Data Services and IHS Markit showed significant relative strength in sovereign and supranational bond evaluations.
  • IHS Markit led significantly in market alignment for bank loan prices.

Overall, vendor’s market alignment performance across the most liquid instrument types varied little. This suggests that other attributes, such as challenge support, transparency and price are important factors to consider when making vendor selections.

For more detail into these findings, please download the full study.

Alternative Investments, Asset Management, Fund Administration

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