Securities lending has strong legitimacy in capital markets as a revenue generating activity for clients, and for passive funds can make the difference between a top ranking and falling near the bottom. However, there are right ways and wrong ways to go about the business. The Finadium Investors in Securities Lending (FISL) Conferences in NYC (April 11-12) and London (May 9-10) are designed to help practitioners understand the best choices for success.
When done right, securities lending gets no applause; it is just a part of the scenery doing its job. This is unfortunate in the same way that no one notices the efficiency of any system until something goes wrong. The flip side of the coin is that when there is a problem, it can cause a loss, headline risk or even regulatory action. A recent fine by the US Securities and Exchange Commission on an investment manager, for improperly benefitting the management company instead of shareholders, is an example of how an error could have been avoided.
In another example, we recently completed a private survey of one segment in the securities lending market and found that half of the investment funds we spoke with did not have a robust plan in place for their securities lending program. This isn’t on purpose – these are smart people – but rather the result of not having thought through the fact that securities lending is an investment product that requires investment guidelines. An agreement with an agent lender is not the same thing as an internal securities lending plan. Hearing this once from a consultant may not be convincing, but hearing the same message from 100 peers should be sufficient to push for change.
The Finadium Investors in Securities Lending events are an opportunity for participants in the securities lending market to learn about best practice from their peers, service providers and related market professionals. Specific panels address best practices, including break out sessions for mutual funds, UCITS funds, insurance companies, pensions, Sovereign Wealth Funds and hedge funds. We also have sessions on operations (queues, pledge structures), taxation and fee splits. We work to strike the balance between the big picture that helps professionals understand where the market is heading with specific details on managing programs for the greatest success.
These events are free for the buy-side including hedge funds, asset managers, insurance companies and institutional investors. We created FISL for buy-side market participants to engage on solving problems and generating risk-adjusted revenue in their securities finance programs – this risk includes program management as well as investment risk. At last year’s events, buy-side market participants outnumbered banks and vendors, and we plan to keep this ratio again for 2018.
The next step is to attend. There is no reason to be caught unawares.
For more information on the conferences and for buy-side firms to register, please visit: