Deutsche Asset & Wealth Management and State Street Global Advisors will no longer acquire asset-backed securities for the European Central Bank under revisions announced Wednesday.
Eurozone central banks will play a larger role in purchases of securitized debt, which have been dominated to date by four external managers, the ECB said in a statement. The National Bank of Belgium will begin acquiring securities from its own country, while the Bank of France will buy assets in more jurisdictions, the central bank said.
The changes represent the biggest overhaul yet of the ECB's asset-backed debt program, which has drawn criticism from investors and traders disappointed by its reach. Since June, the central bank has attempted to inject new impetus by targeting investor holdings rather than just buying notes from banks.
“It's good to see the willingness of the ECB to revive the ABS market because the size of its purchases has been a lot less than investors initially expected,” said Patrick Janssen, an ABS portfolio manager at Prudential's M&G Investments. “However, I fear that without at least revising the capital requirements for investors, the ECB will be the sole man standing.”
The ECB said its adjustments are in line with the “goal of implementing increased purchases by Eurosystem central banks.” The institution has acquired €12 billion ($13.6 billion) of asset-backed securities since November, about 10% of the amount of covered bonds bought under a separate program.
DeAWM and SSgA were hired last year along with NN Investment Partners — formerly ING Investment Management — and Amundi to buy securitized debt.
The decision not to extend the contracts with DeAWM and SSgA reflects growing Eurosystem expertise and should increase the efficiency of the ABS program, and doesn't reflect any dissatisfaction with the managers' performance, an ECB spokesman said. The contracts with Amundi and NN Investment Partners were extended, he said.
The loss of such an important client may harm the reputation of the two firms that are no longer part of the program, said Vincenzo Longo, a strategist at IG Markets.
“State Street Global Advisors has completed its one-year contract with the ECB's Asset-Backed Securities Purchase Program,” said Noreen Shah, an SSgA spokeswoman. “The ECB has recognized our contribution to making the ABSPP a success, and we wish them all the best with the program going forward.”
Nick Bone, a DeAWM spokesman, declined to comment on its removal from the ABS program, while officials for Amundi and NN wouldn't comment on their firms' involvement.
