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The Future of Loans in a Digitized World

06 February 2020

Attendees at our annual loans conference heard that data never sleeps and the people who manage it must stay ahead of the constant demand in a real-time marketplace

Investors and credit traders are drowning in data and they want even more. They use multiple systems every day that can barely interact with one another, but one thing binds them all together: the need for clean, real-time data. Outsourcing remains an important tool in the financial IT team's toolkit because they cannot do everything themselves and while bots are interesting, no one thinks they are ready for prime time just yet. And if that wasn't enough, as regulation keeps evolving and there are worries about a possible economic downturn on the horizon, Facebook is introducing a new digital currency.

These were the topics discussed at our "Future of Loans in a Digitized World" conference in New York. More than 50 private credit and financial services thought leaders gathered to hear discussions on the new trends and developments that are impacting the global loans landscape. The panels featured prominent executives, senior technology leaders and private credit decision-makers from such firms as Morgan Stanley, Northern Trust, Churchill Asset Management, PSP Investments USA, New Mountain Capital, HPS Investment Partners, KeyMan Intelligence and others.

Adam Kansler, President of Financial Services for IHS Markit, opened the proceedings by welcoming the thought leaders and decision-makers in the audience with a quick snapshot of the private credit space. Trading is at record levels, up 23% over last year which was a growth year as well. Closing times are coming down and our ClearPar solution has played a "part in that trend," said Kansler, who added, "We work hard to bring the industry together."

IHS Markit's Elina Gokh, Head of WSO Software, and Sarah Wagner, Managing Director of Loan Platforms, discussed the new features inside the ClearPar trade settlement solution, its updated UI, migration to the cloud and enhanced interoperability. In a survey of attendees, 50% said that technology plays a big role in all areas of the loans lifecycle, including data mapping, trade settlement and agency.

For the first panel, entitled "Preparing for the Future: the Growth of Private Credit and the Opportunities and Risks," participants said that the role of data has never been more important in the private credit space.

"Data is key," said Kevin Meyer, Principal, Churchill Asset Management. His firm tracks "endless amounts of data, which is crucial to our fundraising efforts. Investors need to be able to analyze our portfolio and track record, and it is our job to compile that underlying data from a variety of sources in a clear and coherent way."

This demand for data is straining the limits of traditional business systems. "Requests for more than 250 data sets seem to be standard these days," notes Meyer. "Having data housed in a centralized software portal, as opposed to Excel, is key because investors are getting increasingly savvy and comprehensive in their requests," Meyer concluded.

With this ever-growing demand for data, automation is key.

"We are looking for technology to review the data with the goal of using people for higher value tasks," said Arthur C. Cardillo Jr., Vice President, Finance and Business Development for New Mountain Capital. "In addition, we are searching out more and more efficiencies, as in getting data to clients faster and inside of our firm faster."

In the panel entitled "Digital transformation driving business solutions - yesterday, today, tomorrow," the speakers discussed how trade settlement automation helps free up overworked technology teams to concentrate on other IT projects.

As Senior Director of Operations, Credit Investments for PSP Investments USA, one of Canada's largest pension funds, Peter Russell explained how his group acquires and handles clean data. His job is "making sure all those systems talk together and we have all have one single source of truth. We enter the data once and we know the systems can all talk to each other," he said. "Just last week, instead of my team having to put 180 transactions into the system [as they do] every week, which took three hours, it's now down to five minutes."

He added, "That means I have three hours to invest in my team."

Over the course of the event, other speakers made clear there are two constants in the modern financial world: the need for data and regulators trying to figure out how to manage this ever-evolving market. With this in mind, 2020 promises to be an important year in the evolution of the loans market.

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