A New Market Paradigm: T-REX As the Transaction Servicer in Complex Fixed Income

Here at T-REX, we’re introducing a new paradigm to the market, transaction servicer, to help bridge a gap that many of our clients face in managing their deals. Observing the difficulties private credit lenders experience with data ingestion and reconciliation across servicers, T-REX delved into remedying these challenges by creating the role of transaction servicer, helping to automate data, reconcile it, and provide reporting. 

The Problem: Fragmented Streams of Analog Data and the Risks of Human Error

For private credit lenders, it can often be a struggle to make sense of all the data. Data comes from a range of different sources in a variety of different formats and it can be incredibly challenging to normalize it all. As a result, transaction reconciliation invariably becomes a manual and extremely time-consuming process, absorbing precious resources and undercutting performance by increasing costs. 

A major private credit fund or asset manager will normally leverage multiple servicers for each transaction and ongoing portfolio management. An asset originator will source an opportunity, and the fund will invest or lend money to small to medium-sized businesses in transactions that have loan servicers attached to them. The trustee provides the workflows and the loan servicer acts as the agent that calculates the underwriting details. Unfortunately, there are often discrepancies between the calculations completed by the loan servicer and the reporting of the trustee. In these instances, it is the responsibility of the private credit fund to step in and reconcile the transaction data across the loan servicer and trustee.

At private credit funds, the heads of middle and back office teams typically rank their trustees based on a few issues of paramount importance, namely how closely a trustee is aligned to their opposing loan servicer or how much deviation there is in the reporting of principal balance and interest. Private credit funds are at a loss as to why this market dynamic still exists. 

Unfortunately, most servicers in the market don’t have the appropriate technology to help them manage complex transaction data and instead rely on analog and fragmented processes. Not only are they juggling the complexity associated with each unique transaction, but they also need to be able to keep up with the tremendous volume of transactional data. Across the market, participants have already approached T-REX, recognizing that our platform solves this problem, allowing them to better manage and analyze the data from complex transactions and access reliable, scaleable cashflow reporting. 

How does transaction servicing fit into the broader structured finance ecosystem?

While T-REX can support the entirety of the market, it’s essential to investors looking to make sense of the immense amount of data they receive from partners. Ultimately, it is up to investors to demand better data and accurate calculations from their partners by ensuring that T-REX is written into a deal as the transaction servicer.

As the transaction servicer, T-REX helps move organizations away from fragmentation and into aggregation, allowing them to act as a single source of truth and effectively manage all the data they’re receiving. Further, T-REX is able to act as the calculation agent on both sides of the transaction, providing support to any party in a deal. In essence, T-REX acts as the “servicer of servicers” by aiding the current market participants and reconciling their work. 

How does T-REX solve the data management problem?

  1. T-REX can be written into a deal as the transaction servicer.
  2. T-REX provides comprehensive data management services, ingesting, standardizing, and automating data flows from servicers and trustees, and facilitating overall data integrity for any investment. 
  3. T-REX produces precise analytics, calculations, and reporting on transactions with complex structures, data, and workflows. 
  4. T-REX fosters collaboration through shareable reporting and provides data access to stakeholders via APIs.

When it comes to complex fixed income, T-REX is an enabler, not a disruptor. Disruption can often make the market a zero-sum game. However, enablers eliminate the friction in a system so that all of the existing market participants can win. T-REX is enabling investors to use technology to make their investments, and the market, more efficient. 

Interested in learning how T-REX can support your portfolio management as a transaction servicer? Schedule some time with us to walk through our platform and get started in making your data management workflows more efficient.

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