Private Credit Data

Like leisure travel to Japan, or Hansel earlier this millennium, Private Credit is so hot right now. Gaining insights into this sector has been a challenge. Since 2010, Empirasign has been a leader in shining a light on opaque markets. Today, we demonstrate how we've applied these skills to tackle the Private Credit observability problem.

Public Data about Private Credit

Mutual Funds and ETFs

All Mutual Funds and ETFs must report all holdings and their respective valuations every month to the SEC via the N-PORT filing. And by "all holdings", we mean all. Since Private Credit has become so big over the last few years, many of these funds now have Private Credit positions. We suss out* these positions into a daily updated report that is searchable.

Insurance Companies

Not to be outdone by the money managers, insurance companies have also ramped up their involvement in Private Credit. Via our licensed access to NAIC transaction data, we are able to suss out insurance company activity in this space. Unlike the N-PORT filings, these are actual transaction reports. Alongside the transaction price, you can see the counterparty. Such insights are essential for those eager to take or defend market share in this booming arena.

Report and Search Page

Below is a screenshot of our Private Credit reporting and search page. It can be found under the navigation bar's Market Intel tab, or at the following URL: www.empirasign.com/private-credit/.

Report Features

• The default view shows the 1,000 most recent Private Credit filings (Mutual Funds and ETFs) and transactions (Insurance Companies). Each data set has its own tab. For mutual funds, the principal amount and current valuation of the loan is displayed. For insurance companies, actual transaction data is displayed. This includes principal amount, price, date, and counterparty. Not only can you figure out who owns Private Credit, but what dealers are transacting in this space.
• Fuzzy Search: There are no standard identifiers for Private Credit (e.g. LXID, CUSIP, ISIN, or FIGI) so one must search by name. We make this easy and intuitive. Just start typing in the search box at the top left of the report table.
• Linked Data: Each record is hyperlinked to other internal and external data sources and search tools.
  - If you click on a fund's name, you'll be directed to a page on our site showing all current and past holdings (regardless of sector).
  - If you click on the Accession Number, you'll be directed to the exact section of the N-PORT filing where the loan holding is declared. We do this via a specially constructed URL. There is no need to CTRL-F through a very large document.
  - Clicking on the CIK number will take you to a page showing all the SEC filings for the fund in question.
  - Clicking on the LEI will take you to a page showing more information about the borrower in question. LEI's are unique and help ensure you are researching the borrower you think you are. Given the lack of standard loan identifiers in Private Credit, LEI's are more important here than in other sectors.

What is Private Credit?

Private Credit refers to loans and debt financing provided by non-bank institutions directly to businesses or individuals. These loans are privately negotiated and do not involve traditional public markets or banks. This sector includes various forms of lending, such as direct lending, distressed debt, and structured credit. Most often Private Credit loans are very similar to the structure of loans commonly referred to as Bank Loans, Levered Loans, or Syndicated Loans. In general, since there is often a sole lender (i.e. no syndication) there is a very tight relationship between the borrower and the lender. This affords the lender a better view into the real-time financial state of the borrower. The borrower who is working with only one lender has more options to restructure loan provisions if financial distress arises. It's not all upside, however. The Private Credit market is probably the most illiquid large market around. As a side effect of this illiquidity, valuation is a tricky affair with secondary transactions being few and far between, comparables hard to find, and custom provisions and side letters are hard to model. Furthermore, Private Credit loans are usually much smaller than their Bank Loan cousins. Fixed costs such as underwriting, drafting custom provisions, and deal monitoring can significantly eat into the higher yield of these assets.

* suss out: If you're a VC, you can view this process as completely AI driven. If you're not given to magical thinking, you can better view this process as the sum of human and machine labors by the financial gumshoes at Empirasign.

New Issue Monitor

Squaring the Circle

Empirasign has long been the leader in real-time secondary Structured Products Market Data. Now we bring our real-time parsing and display technology to the New Issue process. We are pleased to present our New Issue Monitor. It can be found at the following URL: www.empirasign.com/new-issue-monitor/. You must be logged-in to view this page.

A recent screenshot is below

The top level view shows aggregated constant deal-level statistics including Deal Name, Sector, and Manager(s). Dynamic aggregated statistics include current class count, update counts, and most recent update timestamp. Additionally, this table is sortable and searchable. To view the real-time state and change history for an individual deal click on any record.

Deal-Level View

Many things can change during the pricing of a deal. As such, it's often hard to keep up with what's changed between the email you received just now, and the (now stale) email you received 20 minutes ago. We automatically highlight these changes for you. The deal-level view has two tables. An example is shown below. The top table has 4 records--one record for each deal update. The bottom table has 8 records. One for each tranche / update combination. Any cell that has changed between its current and previous value is highlighted in yellow.

Future Updates

Market Data API

Right now, data associated with our New Issue Monitor is only accessible via the web application. We'll soon be making this data available via our Market Data API. General Information on our Market Data API can be found here: www.empirasign.com/developer-resources/.

Parser API

If you prefer to compile your own New Issue Market Data, we will soon expose a parser API endpoint to handle such email messages. You can read more about our Parser API here: www.empirasign.com/developer-resources/#paas.

Deep Links

Deep Linking Prices to Models

Context Switching is Laborious and Error-Prone

Coordinating data between web applications and desktop applications can be laborious and error-prone. To make this easier, clients can use the Market Data API. Additionally, with INTEXCalc, price data can be passed via the File System Access API. You can read more about this market data high-wire act here.

What's Past Is Prologue

Today, however, we introduce Deep Linking. These hyperlinks transport the best Market Data from Empirasign directly to a relevant feature on a desktop application. Initially, this feature is available for INTEXCalc and Bloomberg Professional.

Our initial example starts with a BWIC page. URL and screenshot are below. All the magic happens in the dropdown under the Actions column.

www.empirasign.com/bwic/231004R/

Upon selecting Deal Analysis, the Quick Summary tab for the relevant bond will launch on your installed INTEXCalc application (as shown below).

If you navigate to the Scenarios or Price / Yield reports (circled in red), you will see that the $95.12 price from the BWIC page has been autopopulated.

Wait, There's More

You can also send an entire BWIC and live prices to INTEXCalc via a hyperlink. This can be done via the INTEX drop down at the top of every BWIC page. The dropdown presents two options for data sharing:

• Open BWIC in Portfolio Analysis (This option will send BWIC contents and prices directly to INTEXCalc via a hyperlink.)
• Create BWIC Monitor Data File (This option will create a data file for INTEXCalc using the File System Access API)

Bloomberg YT Interop

Using the Bloomberg Links scheme, you can send Empirasign prices directly to the Bloomberg YT function. An example screenshot is shown below. The 95-08 price is circled in red. You can reproduce this result yourself by navigating to the CIM 2023-R4 A1 secid page, and selecting Bloomberg YT under the Actions column.

www.empirasign.com/secid/12569UAA9/

Insider Transactions

Every bond search now directly links to related Insider Transactions.

Insider Transactions and Forms 3, 4, and 5 (A Brief Overview)

Per SEC regulations, Corporate Insiders must report all stock transactions. Corporate Insiders can be broadly defined as executives, board members, and those who own 10%, or more of a company's public stock. SEC Form 3 announces one as an insider. Form 4 memorializes transactions in the relevant equity. These are largely purchases and sales and option grants, purchases, sales, and exercises. Form 5 is a catch-up filing used to memorialize very small transactions not recorded during the year, or missed previous Form 4 Filings.

Record Linking

Whenever a bond search is run on Empirasign, we now also traverse the capital stack to locate the relevant stock issue. From this we can surface Insider Transactions. In the example below you'll see search results for the Aflac bond AFL 4.75% 1/15/49. The number of recent Insider Transaction records (1,730) is displayed on a button (circled in red below).

Upon clicking the Insider Transactions button, you'll be directed to a screen displaying all the recent stock and option transactions in tabular form. A screenshot of this activity can be found below. There are two tabs--one for cash transactions and one for derivative transactions. Each record is hyperlinked to the source SEC filing.

The Best Things in Life (and Financial Data) Are Free

For the next three months, we'll publicly expose all Insider Transactions via a link from our free Findabond Page (no subscription required). To replicate the example above, navigate to our free Findabond page for AFL 4.75 1/49 and then click on the Insider Transactions button.

Findabond Page: www.empirasign.com/findabond/001055AY8/
Insider Transaction Page: www.empirasign.com/insider-tx/US001055AY85/

Cross-Reference All the Things

Surfacing insider transactions based on a bond search is only our newest innovation in linking hard to link data sets. A quick review of recent and past efforts is below.

Linked 13F Filings

Another capital structure hack. We use 13F Filings to deduce which Hedge Funds are likely transacting in related Corporate Bond issues. You can read more about this here:
www.empirasign.com/blog/Linked-13F-Filings/

Matching the World

We surface the most liquid and easiest to trade bonds in the market by cross-referencing dealer runs, BWICs, mutual fund holdings, and insurance company transactions. You can read more about this here:
www.empirasign.com/blog/Matching-the-World/

Surfacing Outliers

We scour all N-PORT valuations looking for the needles in haystack. These possibly mis-valued bonds put trading opportunities at your fingertips. We do similar legerdemain with valuation variances. Read about these here:
www.empirasign.com/blog/Surfacing-Outliers/
www.empirasign.com/blog/High-Variance-Marks/

Studies Linking Insider Transactions to the Bond Market

For the academically inclined, we've included a few links to research on Insider Transaction information crossing the chasm into Fixed Income.

Insider Stock Trading and the Bond Market

Very little is known about how bond market participants react to insider stock trades. Our study attempts to fill this gap in the literature by analyzing the bond market reactions around insider transaction...

www.pm-research.com/content/iijfixinc/25/3/74

Does insider trading have information content for the bond market?

This study documents that there is significant information content in stock trading by registered corporate insiders for the bond market. We report significant positive price reactions for convertible and straight bonds in response...

www.sciencedirect.com/science/article/abs/pii/0378426695000054

On the Bond Market's Evaluation of Insider Stock Trading Activities - Evidence from Germany

An analysis of the effect Insider Stock transactions on the the bond market. Spoiler Alert: The study finds "that insider stock sales convey an important signal to the bond market. Insider stock purchases reduce expected credit risk only at insignificant levels, while sales terminate downward pre-trade credit risk adjustments."

papers.ssrn.com/sol3/papers.cfm?abstract_id=1343438

Serverless Email Parsing

Serverless Email Parsing

We are pleased to introduce a new data acquisition method for our Parse and Store clients.

A Brief Reintroduction to Parse and Store

Parse and Sore is a service option where Empirasign clients can view all their Private Market Data on the same screen as the Empirasign Public Database. Parse and Store links our market leading parser with our market leading web application. The chart below illustrates the basic mechanism.

All clients can access this system at no additional cost for up to 100 messages per day. The easiest way to do this is via our Email Gateway Interface (EGI). Simply send a Run or BWIC message to the appropriate address, and we'll index and display the data (for your eyes only) on our web application.

EGI Email Addresses

Of course, we have clients who look to index thousands of messages a day. And that's where data acquisition gets tricky.

Currently Available Methods

Auto Forward

The client forwards all market data messages to a private dropbox we set up for you (e.g. [email protected]). This method works, but has downsides.

• Email is usually handled as low priority network traffic, and it could take minutes for an auto-forwarded message to hit your assigned dropbox.
• The forwarding process could clog up the Sent Mail folder of your own email account.
• Potential bandwidth limits--this method doubles the number of emails you send and receive per day.

IMAP

IMAP is a programmatic interface to an email mailbox. This method is superior to forwarding, but requires your email server supports IMAP (Outlook, by default, does not). Furthermore, you must run a program that is constantly scouring your mailbox for new messages to send along to our servers. You can read more about this method in our Stop Forwarding and Start POSTing blog entry.

Yes, we buried the lede...

Microsoft Graph API (NEW)

The Microsoft Graph API is a broad API interface to all things cloud-based for Microsoft. If your shop uses Outlook 365, you can authenticate our application, and we'll take care of all the data acquisition and parsing tasks for you. To repeat, via this method there is no software for you to install, run, or maintain.

Getting Starting

Proceed to the authentication page which can be found under the MyData section of the nav bar (see link and screenshot below). The instructions on this page will show you how to generate the authentication tokens for our application (after being redirected to Azure). You will also select what mailbox folder you want targeted by Parse and Store. After generating these tokens, our machines are alerted and the data acquisition and parsing process runs automatically.

www.empirasign.com/outlook365-form/

Your Data is Your Data

Any data collected via Parse and Store is only viewable to you. All such data can be managed on the MyData page (screenshot below). You can view emails and raw data, export raw and parsed data, and delete items. Data sharing within your organization can be permissioned here as well.

Technical Audience

Much of the material presented here has been quite technical. Don't worry, none of this will be on the final exam. Please feel free to have your IT staff coordinate with us. With all solutions, we provide free implementation and testing assistance.

www.empirasign.com/developer-resources/