The Point-In-Time (PIT) Ranking Tool is a user-friendly web-based deal ranking engine based on empirical data about security’s performance extracted from servicer reports.
PIT accommodates different types of investors:
- Relative value investors can make comparisons amongst different tranches and note performance trends over time periods, using a common indexation standard (“Score”).
- Value investors can pinpoint and match deals with client’s value profile from a vast pool without requiring valuation.
- Portfolio managers can optimize investment portfolio through adding valuable deals and eliminating weakly-performing ones.
- Fund-of-funds investors can rate the effectiveness of asset managers with large ABS portfolios by indexing their average PIT ranking.
PIT can also be used for spotting arbitrage opportunities in the market. In an example below two traded AAA/Aaa bonds with the same issuer and structure diverge in value three years before Moody’s takes a rating action. Many such trading opportunities can be created from such rating arbitrages and identified with dynamic rating tools.
The ranking is based on most significant aspects of security’s underlying assets – losses, delinquencies, and prepayments – they are also a simple tool for comparing secondary market risk-adjusted value, with consistent results.
- Forward-looking Expected Loss estimate on the security is re-computed every period from current performance data and the deal structure.
- Delinquency data reflect whether borrowers are prompt on their loan payments. Higher than normal delinquency level indicates early stage potential for unexpected downside risk
- Prepayments affect the transaction in conflicting ways, by inflating the value of future interest income, shortening the tenor of the bond and also masking the impact of defaults and losses
Information updates directly affect the ranking, reflecting the time value of security payment risk. Rankings are recalculated and updated monthly based on latest servicer reports.
We also provide PIT users with ability to further customize their search by using filters such as CUSIP, deal ID, asset class, seller, servicer, bond underwriter, seller, trust type, closing date, etc. This feature allows users to pinpoint or narrow their search from a vast pool of deals, as well as easily make comparisons and note trends amongst different deals over time.