A Better Approach to Credit
UFT Commercial Finance is built upon a philosophy of innovation and creativity as the basis to meet the needs of the credit market. In the post-2008 era, it pioneered the design and introduction of a new credit asset class, the Master Credit Participation Certificate™, or CPC™. With a growing suite of 26 unique credit products that span the yield curve, the CPC™ is fundamentally changing the way "credit" faces the marketplace and the relationship that exists among its investors. This next generation credit solution brings fungibility, agility, and new sources of yield generation to the credit market, providing forward-thinking investors with a manageable investment alternative for introducing global, complex, credit solutions to their portfolios with greater confidence and with a view to enhancing their overall yields.
Core Principles of the CPC™ Asset Class
In price discovery, risk management, and performance analysis, the transparency of data about the underlying assets and confidence in its integrity is a cornerstone in assessing any investment opportunity. Unfortunately, as the events of 2008's credit crisis proved to the world, the complex and inconsistent conventional credit securitization structures obfuscate the underlying credit and collateral data. Analysts and investors had few options and relied, to their detriment, on their trust in the reputable companies involved in a structure. Some of those structures even undermined the value of entire issuances. This made it nearly impossible to evaluate or price certain types of credit. The CPC™ provides maximum transparency to underlying collateral and asset performance. They are designed to draw attention to aberrations through a variety of features, including:
- Structural checks and balances that are designed to cross-reference reporting data derived from borrowers, originators, servicers, independent validation agents, and collateral agents;
- Event-driven reporting provisions that do not just speak to material adverse effects, but seek to draw out any material effect that may impact a credit -- positively or negatively; and
- Comprehensive monitoring of global, independent data sources with regard to screening borrowers, participants, and originating lenders at on-boarding and continuously through their participation with UFT Commercial Finance to demonstrate enhanced compliance with global KYC, AML, and CTF standards.
The CPC™ is a cornerstone of trust. Through its consistency of structure and its independence in execution, the CPC™ Platform works to enhance the integrity of individual credit data and the companies and personnel associated with it. It has created a safe-space in the credit market where borrowers seeking improved terms of credit and investors seeking access to investment opportunities gain an ideal balance between risk and return without the complexity of the legacy credit markets.
UFT Commercial Finance has constructed a highly-standardized credit framework upon which all CPC™ products are built. While agreements are tailored in their security and return structure to accommodate the characteristics of each CPC™ type, they are all governed by a set of common terms and conditions.
This standardization produces a common foundation for each individual credit product. As a result, both credit originators and investors can quickly size-up the viability of a particular credit based upon its merits without concerns for deviations in credit structure. This significantly reduces the time required to evaluate the deal terms, creditworthiness, and investment viability. The ability to reach a quick determination about the quality of a credit opportunity underpins the ability for investors to confidently buy, sell, and trade in the credit market. That type of agility is what breeds an efficient secondary market, the evolution of OTC trading, and, ultimately, an exchange-based liquid market in credit as has never existed before.
When the CPC™ Platform was originally conceived, UFT Commercial Finance sought to assure investors that credit originators and packagers would never again be in a position to perpetuate an originate-process-package-sell cycle with little regard for the long-term quality of the securities they had produced. It was that cycle that allowed a largely nameless and faceless system to produce credit pools that concealed fatal flaws in securitized products that were then sold across the globe. These legacy products were oftentimes opaque to the behavior of the underlying assets and with that lack of transparency came the opportunity for credit contagions to become embedded. That is, the inclusion of particular credits that were not necessarily up-to-par with the rest of the portfolio that had been assembled. Making matters worse, many institutional originators oftentimes did not maintain any ownership stake in products that they packaged and sold off. As a result, there was nominal accountability for the ongoing performance of these credit portfolios. When the credit market faltered in 2008, the global investment community was generally left to fend for itself ... surprised to find that few of the trusted institutions that they relied on had "eaten what they had cooked".
UFT Commercial Finance sees accountability as a critical attribute in a resilient credit marketplace. Transparency and exposure to underlying data is the key to assuring that accountability. At UFT Commercial Finance we couple that transparency with a clear policy that requires all third-party originating lenders that qualify to participate their loans and credits as CPCs™ to maintain a minimum 5% retained interest in each credit and to continue to own the underlying relationship with each ultimate borrower. This makes the fabric of professional accountability stronger through an intrinsic alignment of interests between the investor community and credit originators.
The Art of Cashless Investing™
Discover the power of a new, cutting-edge technique for your investment tool chest – Cashless Investing™ with the Enhancement CPC™. Investors can now enhance portfolio yield without the introduction of traditional leverage, the liquidation of current investments, or the disruption of core investment strategies. Enhancement CPCs™ enable investors to build a truly independent yield enhancement strategy atop a core income-producing investment portfolio. Dependent upon the nature of an investor's portfolio assets and their suitability for use in the creation of an Enhancement Portfolio, an investor could increase its investment capacity by as much as 90% of the market value of its existing assets assets under management. This added dimension can drive higher returns by permitting an investor to fold in virtually any type of investment, from high-quality fixed income to private equity exposure, broadening an enhanced portfolio's investment footprint with nominal opportunity cost and without the risks associated with the introduction of traditional leverage.