We hear it from others and it mystifies us continually when it is said that pension fund “Acquisition Groups” are prolific buyers. Where this idea has emanated from is beyond us but this is not the case. These pension fund managers are actually attempting to buy paper without any type of VOF (verification of funds) and are in reality attempting to use someone else’s liquidity or in essence, “flip invoices”. Steer clear of these groups as well as you will typically find yourself running on a wheel spindle inside a cage.
During a spot buy, the buyer/client is entitled to see the ISIN/CUSIP of the instrument. This however does not mean that they are entitled to see it for a contract. Some clients may ask you for the ISIN/CUSIP. Advise the client that they will have the opportunity to verify the instrument before paying and it does not follow protocol nor will they be allowed to view it ahead of time.
We are amused with the frequency of how often we hear six simple words; “I am direct to the Buyer” or, “I am the Buyer’s Mandate”. Ask if they are contracted or chartered by the client to get them paper. Do they directly correspond with the client or do they go through someone else. Typically, we find out that this wording means that they know someone who knows somebody who can get in touch of someone somehow. The key question is to ask how many people are involved to get “them” direct. The job does not fall on us to be your shoppers. Be sure to ask lots of specific, hard questions that require specific answers and don’t be blinded by generalities in your excitement of getting a deal done.
There are those who profess to buy paper and then there are those who propose to buy paper. Two little words make a huge difference. When a week goes by and you hear, “The buyer is working on the paperwork”, the reason the LOR/FPA hasn’t been returned is typically conjunctive with the fact that “I have not found anyone who will follow along with the procedures”. When a LOR/FPA isn’t returned within a few hours, we know that this more than likely is a “dead buyer”. For this reason, we do not forward any documents to anyone other than the client or his direct representative. Clients buy paper. That is what they do and how they realize phenomenal returns and continue to do so. When they are searching for more fresh cut and seasoned paper, it is because their appetite is larger than their available sources.
