European Securitization Awards 2022: CLO; Mezzanine; Risk Transfer Investor of the Year — TwentyFour AM
The firm’s huge presence in the secondary means that it is communicating with the vast majority of the dealer community every day
Receiving an award determined by the market is always a cause for celebration. Winning two sets a firm apart from its peers. This year, TwentyFour Asset Management has won three – with the market recognising the firm for its performance as an investor in CLO, securitization mezz and risk transfer products.
“Winning three awards is a fantastic recognition of our contribution across the board and the hard work and dedication of the whole team,” says Rob Ford, one of the firm’s portfolio managers and founding partners.
TwentyFour’s success across such a range of different securitization products is notable because unlike some of its competitors, there is no specialisation within its 12-person team. Some managers might spend more time on one segment than another, but each is heavily involved with the entire investment process.
Winning three awards is a fantastic recognition of our contribution across the board and the hard work and dedication of the whole team
“The firm has an exceptionally strong group of portfolio managers with very broad experience,” says Ford, who spent 20 years at Barclays running the ABS secondary trading business. “We’ve always tried to hire top people with backgrounds in a wide range of products.” Douglas Charleston, a portfolio manager on the ABS team, has a background that includes bank treasury investments, as well as both structuring and rating deals. Other members of the team have experience in loan origination, sales and distribution and IT modelling.
When it comes to investing in ABS, TwentyFour has also taken an approach that prizes breadth of ability. “We’ve always felt that ABS is a very particular product and requires a particular skill set,” says Charleston. For that reason, he says, the firm has resisted the larger asset manager model of having separate roles for portfolio managers, analysts and traders. Instead, TwentyFour boasts a cross discipline team where everyone has a skill set that spans the full investment spectrum.
“The ability to source, underwrite, negotiate, trade, risk manage - all that is integrated into what we do and that’s very different from some of our peers,” says Charleston. This setup also means that any one of the team can engage directly with clients.
“Each of them knows exactly what the business is trying to achieve, how the portfolios are built and what the underlying assets are,” says Ford. “Anyone can go from working on the nuts and bolts of a complex transaction, to dealing with the day to day running of a portfolio, to in-depth discussion with clients.”
The ability to source, underwrite, negotiate, trade, risk manage - all that is integrated into what we do and that’s very different from some of our peers
Each one of TwentyFour’s portfolios are mixed across the ABS spectrum; there are no dedicated CLO or other asset class funds. The firm has a risk appetite that varies across mandates, but the bulk of its activity is concentrated in the triple-B and double-B space. “We are one of the biggest holders and most active trading houses in that market,” says Charleston. “We probably trade more mezz CLOs than some dealers.”
Across each of the segments in which TwentyFour has been recognised this year, its prominence in the secondary market stands out. Charleston estimates that 60%-65% of all the firm’s activity is in the secondary. “When dealers and banks are looking for price thoughts or looking to pre-place deals in trickier markets, we’re one of the most active and communicative accounts,” he says.
The firm’s huge presence in the secondary means that it is communicating with the vast majority of the dealer community every single day. This contributes to its ability to act as a conduit during difficult backdrops. As ABS started to recover post-covid, TwentyFour was one of the firms that helped the market recover.
Unlike global corporate debt markets where large supply provided price transparency, limited funding requirements reduced ABS supply and provided less pricing transparency. But TwentyFour was able to rely on excellent relationships and reverse enquiry, negotiate structural features and provide feedback that gave issuers confidence and provided syndicates with clarity over demand.
Finally, TwentyFour shines for its commitment to due diligence. The team makes sure to visit all the managers across ABS mezz and CLOs once a year, and often more frequently. Ford notes that the firm maintains a careful list of preferred managers and factors this analysis into its investments regardless of the tranche.
“We underwrite each deal as though we’re buying the most junior tranche,” says Charleston. “So even our clients with just a triple-A mandate get that depth of analysis.”