Finadium
August 2019

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This report presents the results of Finadium’s 11 th survey of asset managers in securities lending across program operations, fee splits, collateral management and more. The report is a peer review of how managers approach securities lending today and their expectations for future developments in the space. This year’s report covers 30 large institutional asset managers in North America and Europe with US$28.4 trillion in UCITS funds, mutual funds, ETFs, individual accounts, and insurance assets.

Asset managers are adopting a new level of institutionalization in their securities lending programs, with 65% reporting either an active operating committee or one in the process of formation. This shows how far the product has come from the days when securities lending was a back-office process managed by an operations team. Although competition is up from new firms entering the market, managers say they are committed to lending and that a greater understanding both internally and among their clients makes it easier to support their programs.

Managers do wonder though, in an era of bank balance sheet and risk-weighted asset (RWA) restrictions, how well their securities lending activities can generate risk-adjusted revenues given new pricing trends and tighter cash spreads. Market leaders have already begun to adjust by engaging with their agents and internally to optimize processes and opportunities. This is not 2008, and managers are keenly aware of the risks of over-extending. At the same time, they may need to take some action to ensure that program objectives are being met.

This report should be read by asset managers and their agent lenders, custodians, technology and legal advisors, and service providers. The report provides useful insights about the present and future of securities lending at asset managers and insurance companies.

Table of Contents

  • Executive Summary
  • Securities Lending as Operational Alpha
  • The View from Market Participants
    • – Methodology
  • Health of the Market
  • Program Operations
    • – Program Oversight
    • – General Collateral vs Specials
    • – Access to Market Data
    • – Who’s Your Lender?
  • Defining Best Execution
  • Revenues and Fee Splits
    • – Revenue Importance and Expectations for Future Growth
    • – US and European Fee Splits
  • Indemnification, Certainty and Definitions
    • – Indemnification and CCPs
  • Collateral Decision Making
  • Peer Recommendations for a Successful Lending Program
  • About the Author
  • About Finadium LLC
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