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Global Investor/ISF sec fin events review 2012
12 February 2013
Global Investor/ISF hosts events around the world, covering a wide variety of subjects. In 2013 it will again gather key securities finance players in Australia, London and Germany
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securities finance
synthetic finance
short selling
repo
Around the world, Global Investor/ ISF’s securities finance conferences enjoyed continued success in 2012. The Securities Finance Asia Pacific Master Class, held in Sydney in May, brought together securities finance participants including beneficial owners who discussed the evolving nature of securities lending.
Kyle Ringrose, head of investment operations, QSuper, said Super funds typically use a master custodian so would probably engage with securities lending programmes through that relationship. However, he added he would not be surprised to see Super funds creating their own in-house securities lending programmes.
Rob Chiuch, managing director, securities lending, BNY Mellon Asset Servicing, said there was a change in appetite particularly in the US market for non-cash collateral versus fixed income transactions, “double-digit increases in non-cash collateral on the fixed income side, partially attributable to risk appetite and lack of return on the reinvestment side”.
Sinclair Scholfield, head of securities finance for Australia and New Zealand, State Street, posed a central question, from a risk-reward point of view, of whether securities lending is a worthwhile activity for Super funds.
Scott Malpass, investment officer, AvSuper Fund, which engages in margin lending, said: “My directors and my members are quite adept at handling risk. They look at risk every day. As long as you can quantify it they are quite happy to do it.”
Jo Leaper, consultant at Jana, said the only asset class she would not advise to lend would be emerging market fixed interest due to “extra risks, additional custody and operational risks – just in trading, without lending”.
At the Synthetic Finance Summit II in June, hedge funds gathered in London to learn what the future holds for synthetic products. John Redwood, member of the UK parliament and co-founder of Evercore Pan-Asset, compared regulatory approaches of the past, present and future. He said that prior to the eurozone crisis regulators “failed to see the obvious” because they focused too much on the detail, and that “synthetics were part of the story”.
Penny Miller, managing associate, Simmons & Simmons, pointed out that while there has been much attention on the mandatory central clearing of OTC derivatives, less focus has been directed at the challenges for derivatives that will not be subject to central clearing under the Emir. On current and future trends in synthetic financing, Matt Boyd, director at BlackRock, said the asset manager has moved into the futures market and away from certificates and total return swaps. “We look for synthetic products for two reasons.
The first is that it is difficult to trade in the cash market due to regulatory and tax reasons.” The second reason is that investors are looking for yield products at a time when both bond and dividend yields are down, and synthetics have a performance offering that can give them that yield. Jon Aikman, author of the book When Prime Brokers Fail pointed out that some hedge fund managers have been increasingly relying on synthetic products post Lehman Brothers collapse.
In Brazil, at the Securities Finance Master Class IV Latin America in July, chairman Rob Philippa, head of international operations, BTG Pactual, set the tone of the day by highlighting the one factor influencing securities finance in Brazil above all others – steadily falling interest rates.