A conference call was held last Wednesday for portfolio managers and buyside traders to discuss how best to deal with assignment fees. The call was hosted by a loan asset management firm and about 80 people are said to have listened in. The aim of the call was to create a smaller working group with representatives from leading or influential buyside firms. This smaller subset will then steer the issue and propose ideas to the rest of the market, said sources.
The catalyst for the movement came 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 asset managers take control. One loan manager participating on the call said the issue is extremely important and needs to be taken seriously. However, it is crucial for the largest loan firms to get involved to ensure momentum and then success. Without the largest firms the movement will not go far, she added.
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. Furthermore, modernization of the asset class through technology should have mitigated the need for an expensive fee. "It's ridiculous. Even the underwriters know it is too much," said another portfolio manager. Zamore suggested 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)."