BSL data flows are “inefficient”
Broadly syndicated loan (BSL) data flows have been deemed “inefficient”, with some private credit firms still relying on emails, pdfs and faxes to manage fund data.
Cynthia Sachs, chief executive of data company Versana, has warned that private credit fund managers risk delays by maintaining outdated data systems which could struggle to keep up with rising demand from investors.
“Right now, the way data flows in the BSL market is inefficient,” says Sachs.
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“There’s a lot of emailing and faxing, and scraping of those emails and faxes. There are a lot of different events that are happening with the borrower that then ultimately need to be communicated down to the lenders in the syndicate. Right now, that’s being done through email and faxes, and there are a lot of delays, and a lot of errors. There’s a lot of missing information that happens because the process is somewhat antiquated.”
In the BSL market, once a loan has been issued the work truly begins. Each of these loans could involve thousands of different lenders, who have signed up to a floating rate. This means that the underlying BSL data is constantly changing and it is imperative that fund managers can get their calculations right to ensure that both borrowers and investors are getting the right rates.
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The private credit sector is relatively new to this type of data collation, and Sachs has witnessed a number of fund managers relying on emailed pdfs or e-faxes to share this information. This can potentially create a security risk, as well as increasing the risk of human error in a highly scrutinised market.
Versana is a data management fintech which focuses specifically on the syndicated loan asset class. Sachs believes that there is a lot of crossover between the BSL market and private credit, and she is committed to bringing both parts of this market together to improve operational inefficiencies.
“Our platform specifically focuses on fixing the operational inefficiencies in the syndicated loan asset class,” she says.
“Corporate loans, historically were originated out of banks, and the name ‘broadly syndicated loan’ generally refers to that, but corporate loans are originated out of private credit funds as well. And so we also focus on the private credit space in terms of the corporate loans that are being originated out of those private credit funds. So really, we’re focused on corporate credit and trying to fix the operational efficiencies which start with the data and ultimately the technology.”
Versana has more than 4,000 facilities on its platform, and approximately $2.1tn (£1.63tn) of commitments.
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“What we all ultimately are trying to help is making the market more efficient, reducing the cost structure, creating a much better environment, and for more money to flow into the asset class,” says Sachs.
“Versana is very foundational right now, but we’re fixing a very important core problem that everybody needs. And fixing this problem is going to really help the markets to have better data and better analytics, and to grow the asset class ultimately. Because more data equals more transparency.”
Eight major banks are now contributing their data to the Versana platform, allowing the firm to aggregate market data and disseminate it digitally without any manual intervention. In the future, Sachs would like to use this data to create indices and comparison products that can help investors to better understand the private credit sector.
However, for now the focus is on data aggregation. According to a recent Versana survey, data and transparency are the top considerations for investors – even beating out high returns. This has underlined the importance of streamlining data flows and aggregating market data.
“This asset class has been underinvested in,” says Sachs.
“We are really excited to transform this market. We want the market to come together.”
