Leading Asset Managers on Securities Lending Policies and Revenues: A Finadium Survey
Finadium
July 2016
This report presents the results of Finadium’s ninth annual survey of asset managers in securities lending. The report is a guide to best practices, a peer review and a forward-looking analysis of the attitudes and decisions of asset managers in the securities lending space. This year’s report covers 30 large institutional asset managers in North America and Europe with US$19.9 trillion in UCITS funds, ’40 Act mutual funds, individual accounts and insurance assets.
The perspective of asset managers towards securities lending has shifted over the last year. While lending returns for some portfolios have decreased, so has the risk. That is an acceptable trade off for asset managers looking to build support across compliance, risk, trading, portfolio management and legal for their lending programs. Regulation may be an additional cost but the upside is a more transparent, safer market.
This year’s report explores manager participation, how far asset managers are willing to go to meet bank borrowing needs, and the outcome of regulation on program activities so far. Counterparty default indemnification remains an important topic, but now asset managers have already had conversations with their agent lenders or are thinking proactively about how they will respond if agents ask for higher fee splits. The fact that some agent lenders face higher costs for offering indemnification is tangible; the question remains how those costs get shared in the marketplace.
This report should be read by asset managers and their custodians, agent lenders, technology, legal and service providers to benchmark against current practices and assist with planning for the future of asset manager securities lending programs.
This report is 44 pages with 22 exhibits.
TABLE OF CONTENTS
■ Executive Summary
■ Securities Lending and Organizational Priorities
– Methodology
■ Program Participation
– The Rationale for Lending
– The Spread of Specials Only Programs
■ How to Lend: Custodians, Third Parties and Internal Desks
– The Expected CCP Option
■ Securities Lending Revenue Generation
– Are Lending Revenues Important?
– Revenue Growth or Shrinkage?
■ Fee Splits and Indemnification
– How Important is Indemnification?
– CCPs and the Indemnification Conversation
■ Are Regulations Good or Bad?
– Is Transparency Good or Bad?
■ Paths Forward and Business Model Change
– Peer Recommendations for Asset Managers
■ About the Author
■ About Finadium