Leading Asset Managers in Custody, Securities Lending and Collateral Management 2010: A Finadium Survey

Finadium Research Report

Leading Asset Managers in Custody, Securities Lending and Collateral Management 2010: A Finadium Survey

Finadium
June 2010

Regional Focus: North America and Europe

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The Finadium annual survey of asset managers identifies key decision criteria for evaluating service providers and alternatives in custody, securities lending, and collateral management. In custody, we look at the drivers for quality service and how asset manager view custodial pricing. In securities lending, we review how firms select and manage their agent lenders, how they see alternatives for lending programs and how they value their collateral management service providers. This year we expanded our questions to include OTC collateral management; this produced an understanding of asset manager thinking about outsourcing.

Custody, securities lending and collateral management are receiving a significantly increased focus in the minds and priorities of large asset managers. Managers are paying new attention to details, service providers and relationship oversight. Securities lending has found the front office at the majority of firms and will be there for some time. Collateral management in OTC derivatives is still an evolving space, with nearly half of asset managers still considering how best to manage exposures.

Custodians, securities lending agents and their clients are all aware that nothing comes for free. This will be a matter of increased discussion over the next two years, as asset manager business needs, a breakdown in traditional pricing models and a desire to share risk among multiple parties puts additional strains on service providers.

Now in its third year, this survey provides benchmarks for asset managers and their service providers to evaluate programs, practices and assumptions. Distribution has broadened to include senior executives not directly involved with custody, securities lending or collateral management, and the boards of multiple mutual fund managers. Outside of asset management firms, this report should be read by custodians, securities lending agents, collateral managers, technology providers, lawyers and similar service providers. It contains core industry data and reflects an important cross-section of asset management opinion.

This report is 33 pages with 25 exhibits.

TABLE OF CONTENTS
■ Executive Summary

■ Out of the Back Office, Into the Fire
– Methodology

■ Criteria for Evaluating Custody Services

■ The New Normal in Securities Lending
– Selecting and Managing Lending Agents
– Changing Markets and Alternatives for Lending Programs
– Central Credit Counterparties
– Expectations for Revenue Growth

■ Collateral Management for Securities Lending

■ Peer Advice for Running a Successful Securities Lending Program

■ Collateral Management for OTC Derivatives

■ Trends for 2010 and 2011

■ About the Author

■ About Finadium