PF2 employs scientific techniques to understand financial markets and analyze securities, often for buy-side investors wanting to perform thorough due diligence or risk management, or for managers looking for independent oversight or analysis.
Company-Level Valuations and Asset & Portfolio Pricing
Our team’s diverse background allows us a different perspective, as we develop our viewpoints from a combination of buy-side, sell-side, risk, rating agency and legal perspectives. Our direct access to key market participants and to intelligence about market developments and the latest supply and trading levels have been invaluable when working on client-customized projects.
In addition to our examination of quantitative market data, like credit risk metrics, our analyses often draw on the high priority we afford to understanding idiosyncrasies in each market.
For complex assets, we often work to understand:
In the context of private investments, we often need to gauge questions of liquidity (or marketability) of the securities, and issues like controlling interests, voting rights.
fixed income analyses
PF2 uses scientific techniques to understand financial markets and analyze financial products.
Our primary focus is in the area of FICC – fixed income, commodities and currencies, with a particular expertise in structured finance.
When analyzing private, complex or opaque investments, it is often important to appreciate shortcomings in the data provided, and the limitations of mathematical models employed. Moreover, there is often an asymmetry between the promoter's and the investor's understanding of the product offered at the time of sale.
We employ various modeling techniques to gain a heightened understanding of the relevant financial markets, and to discover or uncover truths about the ever-changing financial products being marketed and traded.
We have designed sophisticated techniques to evaluate various types of complex securities, including structured finance instrument such as mortgage-backed securities (MBS) and collateralized debt obligations (CDOs). We are often consulted on issues of market norms and best practices in the structuring, rating, sale, investment or pricing of hard-to-value securities.
We have also built and implemented models to analyze the risks inherent in them, often in accordance with accounting requirements like FAS 115, 157 and EITF 99-20. (read more)
SAMPLE VALUATIONS AND DUE DILIGENCE ENGAGEMENTS
Case Study for Consumer Finance Company
Provided consulting research, in association with a business development plan, for an east coast-based consumer finance company looking to enter a new consumer lending product area.
Valuation of TruPS CDO Portfolio
Consulted on behalf of a New England-based foundation/endowment that was considering a sizeable investment in an asset manager’s trust preferred CDO (TruPS CDO) fund. Provided market value opinions and/or cashflow analytics on over forty assets held by the fund.
Mortgage Loan Due Diligence Review
Created a consulting report that reviews the dynamics of the pre-crisis mortgage loan due diligence process. Report considers the effects of the sampling process on the pool as a whole, and the marginal effect of loan "put backs" and loan waivers.
Valuation of Bank Preferred Securities
Built a simulation model to estimate the performance of a financial institution's assets and liabilities, and analyse credit and non-credit impairment on its preferred securities (capital trust securities).
Valuation of Collateral Management Agreements (CMAs)
Consulted on behalf of a CDO manager looking to acquire the managerial rights to a portfolio of CDOs in a separate sector. Prepared an extensive report detailing the major economic and regulatory risks facing these specific CDOs, and describing deal-specific nuances for management. Modeled projected estimates of collateral management fees that would result under a variety of economic scenarios.
Fairness Opinion on Hedge Fund's Broker Quotes
Provided fairness opinion as to the suitability of broker quotes on certain collateralized loan obligations (CLOs) investments within the hedge fund's investment portfolio.