As we return to our desks after last week’s whirlwind in Las Vegas for the Structured Finance Industry Group (SFIG) Conference, we find ourselves reflecting on how this conference was at once business as usual while also showing evidence of an evolving industry looking to the future. Approximately 8,050 attendees, including a sizable Dechert team, gathered last week at the Aria to discuss past, present and future and to put our heads together to ask “where do we go from here?”
This year, there was no singular topic on the tip of all tongues – no Reg AB II and no LSTA decision; even the changes to EU Risk Retention Requirements received only brief Tuesday afternoon attention (in the form of an excellent panel on which Dechert partner Cameron Mitcham participated). One unofficial theme of the week (apart from the classic blue-blazer-no-tie look that identified the male attendees from a great distance) was how we, as an industry, prepare for what comes next. In a number of panels, we heard both regulator panelists and private company representatives talk about defining our goals as an industry, and prospectively thinking about the policies needed to achieve them, both from an internal perspective, as well as with an eye to building a regulatory framework to support those goals. We heard this not only in the blockchain and technological innovation panels, where this sort of musing is expected, but also in panels on the GSEs and other specific asset classes. The thinking goes: If we have an open dialogue with regulators about the challenges, opportunities and goals facing our business and make them better understand what it is we actually do, maybe, just maybe, we can reduce the knee-jerk reaction that will come from the next downturn when the commentariat bemoans Wall Street traders of all stripes and looks to regulate anything that moves. Maybe, we can stop the next Dodd-Frank in its tracks before it even rises out of the ooze and, instead, end up with tweaks around the edges. Maybe, increased transparency and communication will get us there. Anyway, we said maybe.
Notably, this year’s conference was the first that SFIG has hosted on its own following the dissolution of its partnership with Information Management Network, formed after SFIG’s 2013-creation from the remnants of the American Securitization Forum. Despite some changes to the tried-and-true panel lineup (oh, ABS 101, where did you go?) and a clear attempt to focus on more technical panel topics (if only in name), overall, this annual event felt familiar (think: oversold flights out of JFK, long speed-dating Monday, bank parties at the Cosmopolitan, and standby lists at McCarran).
If it is possible for something to be conspicuously absent only in retrospect, then discussions about the state of the market were conspicuously absent from the majority of the conference this year. It wasn’t until we started writing this blog and its obligatory “how do people see the market doing” paragraph came along that we realized, “wow, this really wasn’t what people were talking about this year.” We polled some colleagues and learned they had similar experiences, with some noting they had spoken with literally zero people about real or imagined downturns and everyone was focused on working deals and getting things done. Perhaps we are feeling the fatigue of having tried to pin down the end of this cycle for the past few years. That said, to the extent the topic came up (and it did, for some of us anyway), some saw the market staying steady (a sort of status-quo period, if you will) and others expressed muted optimism for the future, but few seemed to think the market is going down immediately or any time soon. No one expects a repeat of the events of The Big Short, though its author, Michael Lewis, was an excellent keynote speaker this year. Some people referenced strong fundamentals, continued respectable unemployment levels and the Fed taking a pause on rates and portfolio runoff. Others voiced cautious optimism based on the fact that their own companies look to have respectable prospects for the coming year. Even in a world where Flat Earthers walk among us, at least among SFIG attendees there seems to be general agreement that there will be a downturn someday but not today and, while we wait, we can take affirmative steps now to prepare to make it through. Many business people were heard bragging about how much more liquidity their company has consciously created now compared to pre-crisis. Some waxed about diversifying their investing or financing strategies, while others heralded the roll out of new business lines and products that differ from their existing offerings in some exciting and recession-proof way. While we might not know when or where the carousel will stop, we are making sure we have a ticket for the next ride.