A conference call is scheduled for this Wednesday at 2 pm for portfolio managers and buyside traders to discuss what to do about assignment fees. The call will be hosted by a loan asset management firm and buysiders are being urged to participate. The number is 1 800 779 0645 and the passcode is 52145. The catalyst for the call is from three emails circulated by Credit Suisse First Boston trader Barry Zamore (LMW, 5/31). The ball is now being passed to the buyside, with the intention that the asset management side take control of the situation. Assignment fees have always been a complaint for the buyside, but the issue is taking on more urgency as the size of individual trades shrinks and asset management firms increase the number of funds that they run. Therefore a fund with five funds has to pay a $3,500 fee across each fund, said a loan manager, who argues that this changes the economics of the trade. Furthermore, modernization of the asset class through technology should have mitigated the need for an expensive fee, he said.
Zamore suggests that a working group be formed to tell accounts to commit to new deals only if the following language is part of their commitment. “Subject to a maximum assignment fee payable for any trade (regardless of sub-allocations) of (some nominal amount to be determined).” Portfolio managers argued that this approach can only work if there is a critical mass. It needs the bulk of the market, but in the long run will benefit everyone, several buysiders stated. The need for unity on the issue is what will be discussed on the call, said a portfolio manager.