The credit crunch from the summer of 2008 has been greatly exacerbated, despite the recent $700 billion bail-out, and now market participants must wonder if the attraction for bank loans is short-term or more of a long-term play. The interest in bank loans may be purely tactical, in terms of timing relating to the relative cheapness in valuation and this years market dislocation. Over the summer, market dislocation was favorable as bank loans price plummeted to as low as $.87 on the dollar and various pension plans began a more focused review of bank loans as part of an overall strategy to deal with a weakening U.S. economy and inflationary pressures.
For years, fixed income portfolios have invested to some degree in bank loans, with insurance companies and banks being the dominant investor in CLO. Now pension plans are eying this asset class, albeit with some trepidation. All major asset classes are suffering losses this year, which has helped cast some positive light on bank loans. With rising defaults and inflationary pressure, bank loan clients are eager to invest in a more senior place in the capital structure relative to traditional high yield securities. Everyone is looking for that extra yield pick-up and bank loans look to be a possible viable long-term strategy and to eventually become a mainstream asset class. If this trend continues then this affects investors operationally, since many systems cannot handle bank loans.
What is crucial to investing in syndicated bank loans is the proper accounting, classification and valuation, specific to those loans, to keep track of the many terms and conditions. Operationally, syndicated bank loans should be integrated with other asset types to reflect an overall strategy. If we are to believe that this is a mainstream asset class and not some exotic investment type destined to fade into the sunset, then it is essential that the right systems are in place to account for the entire fixed income portfolio from a holistic perspective. Pricing, valuation and reporting, as well as the means to accurately itemize all of the various income/expense components, are necessary to present the economics of bank loans. CAMRA, which stands for Complete Asset Management Reporting and Accounting, features a Syndicated Loan Module that offers comprehensive and integrated functionality to handled term loans, delayed draws and revolvers (including letters of credit). CAMRA now tracks the facility and all of the underlying contract details with trade uploads on trade date and the allocation of contracts on settlement date. It provides customization and handling of associated fee types such as commitments, LOC and ticking, and is also equipped for re-pricing, rollovers, rate changes and rate conversions, along with full market valuation. Learn why CAMRA is the most "complete asset management reporting and accounting" system in the market today by contacting Samuel C. Mejia, CPA at SS&C Technologies (860-997-5625).