Institutional Investors on Securities Lending, Collateral Management and Custody in 2010: A Finadium Survey

Finadium Research Report

Institutional Investors on Securities Lending, Collateral Management and Custody in 2010: A Finadium Survey

Finadium
January 2010

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With the credit crisis largely behind them, institutional investors are looking closely at business practices in securities lending, collateral management and custody, and wondering how they can be improved. Risk has trumped return as the primary concern, but along the way institutions are evaluating key issues such as the bundling of services, how cash collateral is reinvested and what kinds of fee structures are most appropriate in securities lending. Institutions and their service providers will continue to look at these questions well into the next year.

In this report Finadium releases key findings from its annual survey of institutional investors. Building off of our prior year’s studies, we collected public data on 92 US public pension plans managing over US$2 trillion in assets. We supplemented these data by interviewing 25 leading public, private and nonprofit funds managing $759 billion in assets. Our open-ended interview format allowed institutional managers to provide their own feedback on the markets beyond a yes-or-no survey.

This report has been written for institutional investors and their service providers to provide viewpoints and insights into the current market environment. For institutions, a comparative look at the actions and opinions of their peers can help securities lending professionals and their supervisors focus on decision drivers and evaluate their service providers. For asset servicers, the report offers a candid look into the thinking and requirements of institutional investors to support marketing and product development efforts.

This report is 33 pages with 28 exhibits.

TABLE OF CONTENTS
■ Executive Summary

■ Rebuilding in 2010
– Methodology

■ Traditional and Alternative Programs in Securities Lending
– Changes to Inventory Supply
– Revenues and Utilization
– Single Stock Lending, Auctions and Exclusives

■ Expectations in Collateral Management
– Planned Changes in Cash Collateral Management Programs

■ Bundling and Unbundling of Custodial Services

■ Trends to Watch for 2010
– Setting Fees for Agent Lenders
– The Importance of Benchmarking

■ About the Author

■ About Finadium