Finadium: 2012 asset manager survey highlights CCPs, indemnification, collateralization for non-cleared derivatives

Finadium has released its 2012 survey of large global asset managers and their opinions of securities lending, collateral management and custody. This 50 page report covers the attitudes of 38 executives across 32 large asset management firms. Like other Finadium reports, this survey looks at some of the more vexing issues facing asset managers in securities finance and asset servicing including managing securities lending in uncertain times, who should manage counterparty credit analysis and how serious is collateralization for FX Forwards.

As a special offer to Securities Finance Monitor readers, an excerpt from this report on counterparty default indemnification is available free of charge. Please contact us to request this section.

The report covers three main areas, with regulatory change remaining as an overall driver of business decision making:

– In custody, the report looks at Centers of Excellence and the balance that custodians have built between technology and human resources.

– In securities lending we evaluate the importance of indemnification as seen by asset managers and the impact this may have on revenues and program participation. We also consider the value-add of Central Counterparties (CCPs) in securities lending, the importance of cash vs. non-cash collateral and perspectives on using a custodian versus a third party agent lender.

– Changes in the collateral management space include the massive importance of collateralizing previously uncollateralized OTC derivative contracts including FX forwards, impacts from money market fund reform and diminished supply in the repo markets.

Asset managers feel the effects of regulatory change whether it is targeted towards their industry directly or whether it comes indirectly through bank regulation. Basel III, Dodd-Frank and Solvency II are the headlines that impact the asset management business, but within these large new categories are a host of small rules that continue to undergo adjustment by national regulators and central banks. The uncertainty of the specifics, including US funds registering as a Commodity Pool Operator or how taxation will affect securities lending demand, leads to a wait and see approach for decision making until decisions need to be made with great speed.

This report should be read by asset managers, their service providers and their advisors for a better understanding of the perspectives of asset managers in the custody, securities lending and collateral management markets today. The report also contains helpful peer commentary and asset manager expectations on the direction of the asset servicing and securities finance markets over the next twelve months.

The press release and table of contents for the report is here.

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