Transcript CHARTERED CAPITAL, LLC

CHARTERED CAPITAL, LLC
STRUCTURED FINANCE GROUP
Overview of Processes and Organization
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Introduction
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Chartered Capital is a newly established specialized
investment boutique dedicated to the creation of unique
structured finance products optimized to protect capital
and achieve superior performance in the critical areas of
risk, return on equity, and indenture compliance. Our
objective is to build and maintain a quality brand name
that will stand globally for exceptional professional
management, outstanding risk management, capital
protection, superior performance, creativity and
transparency. This brand name will support our goal of
becoming a lead and long-term player in our niche.
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To achieve the above vision of the company, Chartered
Capital is managed by a core of intensely-focused and
seasoned professionals with over 50 years of cumulative
relevant experience. The initial focus of the company is
the creation and management of cash flow CDOs
backed by MBS, ABS and investment-grade corporate
bonds.
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Key Personnel
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Babatunde Aboyade-Cole, B.Sc, M.Sc, MBA
An experienced quantitative analyst, structurer, manager and trader, he is the
founder of Chartered Capital, Llc. He is also the CEO and CIO. He was for
more than four years a member of the Wall street firms, Worldco Llc and
Assent (a division of Sungard) Llc, and a proprietary securities trader and
analyst. Prior to that, he was in financial advisory practice helping companies
such as Mobil (ExxonMobil) to structure funding deals based on fixed income
instruments. He was also an analyst with Glaxo (GlaxoWellcome), a controller
with a Saatchi & Saatchi affiliate, CEO of a marketing communications company,
and an assistant professor of physics. Altogether, he has 16 years of relevant
experience and 20 years post graduation experience.
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He graduated with honors in engineering physics and business administration
from Nigeria’s top university, Obafemi Awolowo University. He also holds the
series 7, 55, 24 and 63 licenses.
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Key Personnel
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Francis Ubini B.A. Economics, B.S Business Admin, M.S. Finance, MBA
 Mr. Ubini is the senior vice president and analyst in charge of corporate
bonds and ABS. He was for more than six years member, analyst and
trader with the Wall Street firms of Worldco Llc and Assent Llc (a
division of Sungard). Prior to that, he spent about four years at
American Express with responsibilities including securities research,
investment management, risk management and consultancy. He was
also a research analyst at Oxford Capital Securities and a financial
Analyst at Kraft Food Inc. Altogether, he has had about 20 years of
relevant experience.
 He is a graduate of St John’s University (GPA 3.94), Baylor University
and SUNY. He holds the series 7, 55 and 63 licenses.
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Key Personnel
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Adenike Aboyade-Cole B.Sc, M.Sc.
She is the senior vice president in charge of operations, administration,
compliance and economic analysis. She was for more than three years a
member, trader and analyst at the Wall Street firms of Worldco Llc and Assent
Llc(a division of Sungard). Prior to that, she was Head of Credit and Operations
at CMIS Group, a financial advisory practice that structured fixed income and
project funding deals for such firms as Mobil (ExxonMobil). She also had
experience in financial and economic consulting, providing project and financial
analyses services to Chevron (amongst others) and being part of a team that
provided economic research basis for the Nigerian Rolling Plan. Ms AboyadeCole has auditing and client relations background. She has about 16 years of
total experience.
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She is an economics graduate of the University of Lagos, and holds the series 7,
55 and 66 licenses.
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Key Personnel
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Yueh-Hung Chen B.Sc
 Mr. Chen is the vice president and analyst in charge of MBS. He was
for about six years a member, analyst and trader at the Wall Street
firms of Worldco Llc and Assent Llc (a division of Sungard). A strong
analytic mind, he will work with Mr. Aboyade-Cole to provide
comprehensive analysis and quantitative modeling of MBS and ABS.
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He is a finance graduate of the University of California Polytechnic.
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Investment process
Chartered Capital investment approach is generally based on the
concentric model that analyzes the contextual investment environment
(macroeconomic trends, technical market factors, yield curve, market
volatility, interest rates, etc), followed by industry/sector analyses
(industry attractiveness based on demand, cash flow and margin trends,
competitive position, cyclicality, profit drivers, leverage, etc) and finally,
detailed analyses of individual company are performed to evaluate
business model, competitive position, quality of management, financial
condition, historical trends and performance, sustainability of core
business, earnings and demand volatility, cash flow, etc. Rigorous
quantitative analyses and computer modeling are employed, and
qualitative analysis based on scoring system is also used.
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The company will maintain a compact, flexible but structured
organization marked by unhindered lateral and vertical communication
and interaction that allows for free generation of ideas and quick
implementation of decisions. However, the company’s operations are
structured to ensure disciplined investment process, compliance
oversight and administrative effectiveness.
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The Process
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THE PROCESS
The structure of the investment process is hinged on the committee system. There are three
committees viz:
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Executive committee
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Investment committee
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Tactical committee
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Executive committee
This committee comprises of the four senior executives, and it establishes the framework for
investment based on the contextual(economic) environment and market trends.
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Investment committee
Comprising of senior management and vice-presidents, this committee approves investment
recommendations by consensus. This committee also establishes consensus on such
issues as duration, yield curve exposure, sector/geographic weighting, diversification, credit
quality, and liquidity. An enlarged committee that includes all investment professionals do a
detailed performance analysis of all outstanding CDOs weekly in addition to the real-time
monitoring, real-time electronic information update and end-of-day electronic summary
performed by analysts.
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The process
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Tactical Committee
Comprising of all the investment professionals, this committee reviews the
results of the concentric approach, identifies and rates favorable industries,
geographical locations, servicers, issuers, issues; sets prepayment, interest and
default rates expectations; and establish parameters for analyzing different
securities/issues. Macroeconomic trend and industry/sector analyses are
presented for review quarterly; issuer/issue analysis and updates are presented
at the weekly meeting. Analysts perform reviews of new and secondary issues
as they become available, and if they believe strongly that it is an investment
candidate, they may recommend it to the Investment Committee for immediate
consideration and approval.
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Decisions of each committee are committed to writing with the party responsible
for implementing specific decision indicated along with implementation deadline.
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The process: ABS
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Analysts are expected to do the following when analyzing these securities:
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Read the offering circular to understand the various covenants, special situations, call
provisions, waterfall, geographical distributions, FICO scores, LTV, etc;
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Do an inverse structuring using in-house proprietary software to analyze the issue and
subject it to various sensitivity tests based on our interest, default rate and prepayment rate
expectations; structural analysis will also focus on credit enhancement, loss or delinquency
triggers, losses allocation, etc
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Evaluate the servicer, the originator (underwriting practices, historical performance of
the collateral, etc). Servicer/issuer evaluation will often include site visit and interview with
the issuer’s senior management;
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For CMBS, evaluate LTVs, net rent-loan ratio, property and geography concentration,
tenants, market trends, etc;
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Rigorous quantitative analysis of the valuation of the security;
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Review of third party analysis (rating agencies, underwriters, external information
providers, etc) to supplement internal analysis.
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Establishment of internal rating for the security;
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Preparation of investment memorandum;
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If security approved for purchase, set it up for surveillance on the company’s security
monitoring and alert system.
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The process: Corporate bond
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Analysts are expected to do the following when analyzing these securities:
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Read the offering circular to understand the various covenants, special situations, call
provisions, etc;
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Detailed financial and business analyses of the issuer to establish business model,
financial condition, competitive position, cyclicality, profit drivers, margin and demand trends,
cash-flow, strengths, weaknesses, threats, performance sustainability; detailed quantitative
modeling and performance projections, including sensitivity analysis, breakeven analysis,
etc;
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Management effectiveness analysis, including interviews with senior management and
site visits;
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Rigorous quantitative analysis of the valuation of the security;
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Review of third party analysis (rating agencies, underwriters, market research
agencies, industry reports, external information providers, etc) to supplement internal
analysis;
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Establishment of internal rating for the security;
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Preparation of investment memorandum;
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If security approved for purchase, set it up for surveillance on the company’s security
monitoring and alert system.
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Third party softwares used for analysis and review include Fitch’s stress software, Intex and
Riskmetrics CDO suite. Bloomberg is utilized for trading purposes and for tracking
securities, although others like Intex are supplementarily used.
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Procedures and Controls
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The company’s compliance system
ensures effective procedures and
controls. This system consists of written
policies and procedures, and a companywide proprietary compliance software.
The compliance software allows a real
time compliance monitoring of trades and
the CDO portfolio.
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Trade monitoring relates to best
execution, asset pricing and portfolio
guidelines compliance. CDO performance
is regularly checked and analyzed, and it
is monitored for covenant compliance.
Alerts are set for breaches of all kinds.
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Portfolio Management
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The portfolio manager together with the analysts
undertake portfolio management. Collaterals held are
divided between the four analysts who are responsible for
monitoring them real time and producing regular reports
on them. These securities are consolidated into the
database of the company’s proprietary software with
specific surveillance templates. The software is hooked to
several commercial data and information feed sources
which enables real time electronic monitoring. Monitoring
includes the following amongst others:
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Monthly/quarterly remittance data;
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News on security, originator, servicer, issuer,
industry;
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Ratings action;
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Delinquency, prepayment and default information;
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Analysts reports, projections and research;
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Price movements, etc;
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Interviews with deal administrators, servicers, rating
agencies, issuers and third party information providers as
needed;
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Portfolio management
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Security stress tests using latest information so as to more accurately determine credit risk.
Performance monitoring log is maintained for each asset, and this includes summaries,
commentaries, analyses and recommendations. Those that are determined to be credit risks
are immediately referred to the manager for immediate action. Those that have deteriorated
or likely to soon deteriorate, but not yet a risk, are set up as watch list on the proprietary
system with alerts.
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Watch list credits are reviewed at analysts meetings daily, while reports on all credits are
presented to the investment committee weekly or bi-weekly.
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The proprietary system automatically generates the following reports each time there is a
material change in the portfolio (e.g. default, downgrades, upgrades, prepayment, sale,
addition, interest rate changes(weekly), etc):
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Cash flow projections with waterfall;
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Covenanted structural characteristics (OC, IC, WAR, WAC, WAS, WAM) compliance
report;
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Stress and Monte Carlo analysis.
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These reports are also printed monthly for management and committee actions. In addition,
comprehensive CDO reports that accord with or surpass the standard approved by Bond
Market Association and the requirements of the trustee and external auditors are printed
periodically, and electronically transmitted over secured lines and reconciled with relevant
third parties.
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CDO Administration
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The operations department is headed by an
experienced professional. The department processes
and reconciles with the trustee daily cash flows,
principal and interest allocations, and all trading
activity. This is supported by the company’s proprietary
software which, as already been noted, produces
relevant compliance and cash flow reports which are
reconciled to the trustee and the CDO indenture.
Compliance software is modeled to the indenture and
tracks compliance tests based on eligibility
requirements and portfolio manager’s preset
performance requirements.
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Detailed monthly and quarterly investor reports are
produced. All reports includes time series collateral
analysis, compliance tests, detailed pricing, ratings
changes, trading activity and rational, defaults,
prepayments, etc.
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Technology
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Chartered Capital attaches great importance to
technology. The company has a policy of acquiring
state of the art technology to support its operations. The
company’s CDO suite consists of several modules that
integrate all front, middle and back office systems,
databases, and external data sources in one seamless
platform that guarantees efficiency and effectiveness,
and facilitates information flow and data exchanges.
There are also specialized stand-alone systems used
by analysts and others to perform special analyses,
quantitative modeling and research. There is access to
several third party sources including Bloomberg, Yield
Book, ABS-Net, Trepp, Conquest, RealPoint, and rating
agencies. Our technology platform will go through
regular updates and upgrades as better technology
resources become available through research and
development.
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A major component of our technology strategy is
catastrophe protection. Everyday, at the close of work,
updated critical information is downloaded to a safe
location in Queens, New York. A tape copy is also kept
in fire proof safe in the office.
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CONTACT
 Tunde Aboyade-Cole
 1-347-724-6277
 [email protected]
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