Cadence | Delivering on the Promise of Real Time Data for Private Credit

Delivering on the Promise of Real Time Data for Private Credit

In another first for the industry, Cadence is excited to release its latest feature ushering in an unprecedented level of transparency to the private credit markets. We are now the only alternative investment platform on the market delivering real time performance data on each and every underlying asset in our structured note offerings. This is fully aligned with our mission of providing above and beyond disclosure and access to what has traditionally been one of the most opaque and tough to source asset classes for investors.

Current and prospective accredited investors on our platform will now have the ability to monitor how the underlying assets supporting our offerings are performing on a daily basis. A clear and concise high level performance summary is now available alongside granular details with respect to each individual underlying loan separated by Asset, Payment, and Participation details.

How to Interpret the Data

 

Summary

  • Total Number of Assets: Aggregate number of assets whose performance is directly supporting the cash flows required to repay investors’ principal and interest
  • % of Performing Assets: Percentage of aggregate assets that are paying on time and not in default
  • Total Participated Cash Flows: Future cash flows our SPV has purchased at a discount over a specific time frame directly from the originator that is commensurate with the interest rate and duration of the note sold to investors
  • Projected Cash Flows to Date: Aggregate future cash flows that we expected to realize as of today based on our participations on projected payments
  • Actual Cash Flows to Date: Aggregate cash flows that have been realized as of today based on our participations on all payments made since the issuance date of the note
  • Total Remaining Cushion: As per our contingent over-equitization (first loss) provision with the originator, the aggregate remaining balance available to absorb any future cash flow shortfalls

 

Asset Detail

  • Total Funded Amount: Aggregate value of all underlying assets whose performance is supporting the cash flows required to repay note investors’ principal and interest
  • Average Funded Amount: Average size of each underlying asset
  • Weighted Average APY: Weighted average annualized percentage yield across all underlying assets
  • Top 10 Concentration %: How much of the total portfolio is represented by the largest 10 underlying assets

 

Payment Detail

  • Total Payoff Amount: Aggregate future expected value of all underlying assets based on expected payments, pay off/maturity date and APY
  • Average Payoff Amount: Average future value of each underlying asset upon payoff/maturity date
  • % of On Time Payments: Percentage of last payments received in adherence to payment schedules and frequencies
  • % of Assets Fully Paid Off: Percentage of all underlying assets fully paid off either ahead of time via prepayments, on time as per the expected payoff/maturity dates or other

 

Participation Detail

  • Projected Cash Flows to Date: Aggregate future cash flows that we expected to realize as of today based on our participations on projected payments
  • Actual Cash Flows to Date: Aggregate cash flows that have been realized as of today based on our participations on all payments made since the issuance date of the note
  • ∆ Actual vs. Projected: Current cash flow surplus or (shortfall) based on payments realized as of today vs. expected payments according to the terms of each asset, thus providing a real time measure of underlying asset performance and note performance
  • Total Remaining Cushion: As per our contingent over-equitization (first loss) provision with the originator, the aggregate remaining balance available to absorb any future cash flow shortfalls

 

The Benefits of Real-Time Data for Private Credit

 

For prospective investors in an upcoming note offering

Use this unparalleled transparency to your advantage by assessing whether to make an investment based on current and historical performance of a note series, originator and/or asset class. A few things that you should keep in mind as you look at the past performance of the notes from that originator:

  • Time to Cover Period: How long did it take for the underlying cash flows to reach the amount of future principal and interest that was expected to be paid back by note maturity? If it took less than half of the duration of the note, this can be viewed as a well structured offering as the risk of cashflow shortfalls was clearly mitigated
  • Remaining Cushion at Maturity: Was any amount of the continent over-equitization (first loss) provision utilized? If so, how much was remaining? If the cushion was left largely intact upon maturity or time to cover, then it can be presumed the offering was structured well and the underlying cash flows performed better than expected vs. historical portfolio losses
  • Disclaimer: Past performance is never a guarantee of future results. Our intention is to provide as much disclosure as possible and lead with transparency so that prospective investors can make well informed decisions based on trusted data

 

For investors in an existing note offering

Leverage the frequency of the real time data to gauge how your investment is performing. Based on your satisfaction with current performance, you’ll be able to make much more informed decisions going forward. A few things to keep in mind as you look at the current performance of a note you are already invested in:

  • As you consider participating in a future rollover opportunity with the same originator and note series, you can assess whether the level of return being offered is commensurate with the performance to date. If the delta between actual and projected cash flows remains positive and the marketed APY on the rollover is the same, this can be viewed as an opportunity to improve expected risk-adjusted returns.
  • You may consider exploring other asset classes by taking a view that the expected performance and underlying exposure is an interesting hedging opportunity. For example, if you begin to witness a slow down in underlying payments in your note from a consumer-facing originator during an economic downturn, you may consider participating in a note program from an originator facing investment grade counterparties.
  • Lastly, one of the biggest hindrances of investing in alternatives has been the inability to efficiently and frequently obtain valuations. For the first time in history, current investors in Cadence structured notes will be able to actively compare the value of their private credit holdings with other marked-to-market investments within a broader diversified portfolio. The implications of leading with transparency are profound and we believe price discovery can be ascertained outside of prevailing trades in a secondary market.

 

A New Paradigm for Private Credit

This is one of several core features we believe will create a transparent and efficient market for private credit. Giving investors like you the comfort that comes with visibility into how your investments are performing is a crucial first step towards making this new reality possible.

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The information on this website does not constitute an offer to sell securities or a solicitation of an offer to buy securities. Further, none of the information contained on this website is a recommendation to invest in any securities. By using this website, you accept our Terms of Use and Privacy Policy. Past performance is no guarantee of future results. Any historical returns, expected returns or probability projections may not reflect actual future performance. All investments involve risk and may result in loss, including loss of principal. Cadence does not render investment, financial, legal or accounting advice.