Beneficial owners survey results
The 2015 beneficial owners survey highlighted the relative
strength of the major agent lenders across three geographical regions and
twelve service categories. The weighted methodology – which takes into account
the size of beneficial owners’ lendable portfolios, how important they consider
each service category to be and regional variations – and raw data tables both
produced results of which several firms could be proud.
State Street was rated the best agent lender by the weighted methodology in the Americas and Emea, as well second best in Asia Pacific. JPMorgan was the highest-rated firm in Asia Pacific and, weighted, came second in the Americas and third in Emea. eSecLending achieved the highest unweighted average, due to its winning Emea and second-place Americas scores, and was considered the most innovative agent lender. Goldman Sachs had the highest weighted average score, as a result of coming second in Emea and third in the Americas (regional positions it also achieved in raw data). RBC Investor & Treasury Services was the highest-rated agent lender in the Americas according to the raw data. All other firms, as the following analysis reveals, performed strongly in at least certain areas.
State Street
In the weighted all lenders tables, State Street achieved the highest global total score (18.91) and, of the firms that qualified in all three regions, the highest average score (6.30). It also achieved the highest score in two regions.
It won in Emea (6.27), with one beneficial owner commenting: “We have had an excellent year with State Street and the service has been getting better every year we have been with them. They are very responsive to our needs.” It also won in the Americas (7.04). “2014 has been a very positive experience overall with provider,” commented one beneficial owner in the region.
State Street’s average weighted score was however lowered by
its score in Asia Pacific. Its very strong raw data Asia Pacific score was
diminished only by a much lower average lendable portfolio size, for all firms,
in the region. One beneficial owner in Asia commented: "They are doing
good job servicing the client and always try to do anything can help us to do
better."
In the weighted all lenders category tables, State Street achieved winning scores in five categories: collateral management; market and regulatory updates; relationship management; risk management; and settlement and responsiveness to recalls. It came in second in four further categories.
In the raw data all lenders tables, the Boston-based bank was second place in the Asia Pacific and global total tables.
In the custodial lender tables State Street achieved a clean sweep under the weighted methodology of every region, as well as global total and average score. It achieved these positions as a result of a dominant position across the service categories, where it topped every table except reporting and transparency, where it came second.
State Street was
considered to be the most innovative agent lender by the joint-second highest
number of beneficial owners. It received votes and positive comments from respondents
in all three regions. In the Americas an investment management firm commented
that it is “constantly bringing us new markets
and ideas” and has “excellent planning ability regarding new regulatory changes
and how it will/could impact the future”.
In Europe,
one noted: “They have invested in technology to increase the transparency of
their programme which is very important.”
In Asia one beneficial owner noted State Street was “always looking into the special opportunity to improve clients' revenue” while another enjoyed its “reporting customization and top 10 earnings reports for fixed income and equities” and was looking forward to the result of work on a “monthly report automation project to minimize manual intervention”.
JPMorgan
JPMorgan was
one of only two agent lenders that qualified in all three markets. In the weighted
all lenders tables it came first in Asia Pacific (6), second in the Americas
and third in Emea. It also achieved the second highest global total score and
the third highest average score – missing out on second place by the slimmest
of margins, 0.01.
JPMorgan achieved first place in three of the corresponding service categories: handling of corporate actions/dividends; market coverage (developed markets); market coverage (emerging markets). It came second in a further two categories.
In the raw
data all lenders tables JPMorgan achieved the highest global total (19.4) and
the highest score in Asia Pacific (6.83). It achieved first place in one
corresponding service category, market coverage (emerging markets), and
came second in a further two categories.
In the weighted custodial lender tables, JPMorgan placed second in the Americas, Asia Pacific, global total and average score and third in Emea. In the corresponding service category tables it was placed first in reporting and transparency and second in every other category except emerging market coverage (where it did not qualify).
In the raw
data custodial lender service categories JPMorgan topped the market
coverage (developed markets) table and came second in two others.
One European beneficial owner commented: “JPMorgan provides an all-round first class service with strong client support from both London and Bournemouth. I have experience of a number of lenders and they are the best by a country mile.” One in the Americas added: “The JPMorgan team is excellent. The relationship management & client service team is exceptional in responsiveness and service. We appreciate the transparency and partnership to work directly with the trading desks when questions arise around the portfolio.”
JPMorgan came fourth in the poll for most innovative agent lender. One US beneficial owner commented that it had “developed an impressive new technology platform”. In Emea, one noted that it offers a “seamless programme that does not impact day-to-day management of accounts”. In Asia Pacific, one praised the “enhancement of the programme to include equity repos, US dollar cash and fixed income loans vs equity collateral”.
eSecLending
In
the all lenders tables, eSecLending achieved its best results when only raw
data was considered. It achieved the highest average score (6.68) and Emea
score (6.8) and came second in the Americas. It achieved the third highest
global total – but as it was only beaten by lenders that qualified for an
additional region it could be considered something of a victory.
eSecLending received the highest scores in seven of the corresponding service categories: programme parameter management; programme customisation; market & regulatory updates; relationship management; reporting & transparency; risk management; settlement & response to recalls.
eSecLending
was voted the most innovative lender by beneficial owners, securing votes from
17.5% of the survey sample. It received votes and positive comment from both
sides of the Atlantic.
In
the Americas, one beneficial owner which voted for it commented that it has “approached and provided fresh and innovative
solutions to our challenges this year” and another that it was “thinking
outside the box,
It was a
similar story in Europe with one beneficial owner commenting that it is
“constantly searching for new opportunities and is regularly in contact”,
another that it is “very proactive to lend in new emerging markets”. Another
praised its collaborative attitude: “We are constantly working with eSecLending
to develop new products for our funding and financing needs. In addition, they
offer a fantastic reporting portal that allows direct access to our lending
reports.”
Due
to eSecLending’s business model all its votes were included in the third-party
agent lenders tables. While the scores were the same in the all lenders and
third-party tables, the positions it achieved were different (as other firms’
custodial scores were included in the all lenders tables). It did even better
in the third-party tables – in terms of raw data, eSecLending won across the
board, topping the Emea, Americas, global total and average score tables (no
third-party agent lenders qualified in Asia Pacific).
One European beneficial owner commented: “An
excellent agent lender all around. Revenue estimates are always transparent and
achieved, the market information supplied is superb and the quality of the
management team exceptional. We are very pleased to have eSecLending as part of
our team.” Another added: “Excellent client service, very dynamic and
proactive.” One in the Americas commented: “Very responsive when
needed.”
In the corresponding raw data third-party service categories
it was the winning provider in eight tables: market coverage (emerging);
programme parameter management; programme customisation; market and regulatory updates; relationship
management; reporting & transparency; risk management; and settlement &
responsiveness to recalls. It came second in a further three categories. It was pulled down
under the weighted methodology but still achieved second place in three
categories.
Goldman Sachs Agency Lending
Goldman
Sachs Agency Lending (GSAL) did very well across the all lenders tables,
excellently so by the weighted methodology. It achieved the highest weighted average
score (6.50) as well as the highest weighted global total of all the lenders
that qualified for two regions. It was also the second placed lender in Emea
and the third in the Americas.
GSAL topped four all lenders weighted service categories: income generated vs expectation; programme parameter management; programme customisation; reporting & transparency. It also came second in a further six (one jointly).
In the raw data all lenders tables, GSAL achieved the second highest average and Emea scores and third highest Americas score. It topped three service categories as well: handling of corporate actions/dividends; income generated vs expectation; and market coverage (developed). It also came second in a further five.
GSAL had exclusively third-party agent lender responses so its scores in those tables were identical to those in the all lenders tables. However, these same scores earned it higher positions. It achieved a clean sweep of the weighted third-party tables, topping Emea (6.19), the Americas (6.8), global total (12.99) and average score (6.5) (no firm qualified in Asia Pacific). It also took the top spot in every service category it qualified for, which was all of them except collateral management.
In the third-party raw data tables it came in second in every headline table (again bar Asia Pacific). It topped three service categories and came second in a further eight.
One European beneficial owner commented: “Overall we very happy with the relationship and service provided. This lending agent has a proactive approach and has been of great assistance facilitating the roll out of securities lending across our fund range.” One in the Americas added: “GSAL is extremely responsive to requests and have met with our senior management team on multiple occasions, providing market updates and industry perspectives on issues. They are extremely well controlled and are very proactive with issues and market opportunities.”
GSAL received 10.7% of the votes for most innovative provider. One beneficial owner in the US commented: “It has developed an impressive new technology platform.” One in Europe added: “GSAL always looks for the best way to enhance programme performance, new ideas and new opportunities in the risk/return framework we implemented.”
Citi
Citi achieved its best all lenders result in the raw data tables, where it secured the third highest average score. It was particularly strong in the corresponding service category of collateral management (6.59), where it took the top spot. It also secured second position for market & regulatory updates; relationship management; and settlement & response to recalls.
Citi qualified both as a custodial and a third-party agent lender. Its best result came from its clients that also use it as a custodian – in the raw data tables it had the highest average score (6.53). This result was gained through consistent performance across Emea and the Americas, with second places in both markets. Citi took the top spot in four categories: programme parameter management; programme customisation; relationship management; and reporting & transparency, and took second spot in a further three service categories. Its average score dropped to third place in the weighted tables.
In the third-party agent lenders tables, the situation was reversed. It secured second place for its Americas score in the weighted tables, but dropped to third for raw data.
One European beneficial owner commented that “Citibank listens very well to its clients” and another added it is “the benchmark for other providers”. In the Americas one beneficial owner stated that “Citi does a great job managing our lending programme and bringing opportunities to us to increase income.” Another added that its “performance over the last year was greatly enhanced due to the information sharing that took place between our managers and the lending agent.”
Citi secured the fifth most votes for the most innovate title, with one beneficial owner in the Americas noting “They have been able to work us onto a new platform increasing utilization and Income” and one in Europe noted that “they always come up with new initiatives to enhance revenues taking into account our risk profile.”
RBC Investor & Treasury Services
RBC Investor & Treasury Services (RBC I&TS) achieved its standout all lenders score in the raw data Americas table, where it achieved a winning score (6.65). Its best service category score also came in the raw data methodology, where it secured second place for both income generated vs expectation and risk management (jointly).
In the custodial lender tables, RBC I&TS also took the Americas raw data top spot. In the Americas, one beneficial owner stated: “Our securities lending revenues benefited in 2014 from a significant increase due to a broadening of the programme. This increased volume was seamless to our trading and operational activity.”
It also secured the second highest average score for custodial lenders, raw data. In the corresponding service categories, in came top in seven tables: collateral management; handling of corporate actions/dividends; income generated vs expectation; market coverage (emerging); market & regulatory updates; risk management; and settlement & response to recalls.
One beneficial owner in Europe commented: “I remain very happy with the service provided by RBCI&TS” and another that it “reacted well to changes in circumstances for our products (tax in France) and sought to find revenue from other streams such as exploring fixed term trades, tri-party and operating efficiencies.” Another simply that he was “very satisfied”.
RBC I&TS secured 5.8% of the votes in
the most innovative agent lender poll. One beneficial owner in the Americas
commented that its “enhanced
online reporting allows summary reporting across funds” and another that it
“proposed several suggestions to increase the lending volume potential without
increasing risk… This was successfully done”. One in Europe added: “They
anticipate the needs of securities lending clients and proactively customise
solutions designed to meet those needs.”
Deutsche Agency Lending
Deutsche
Agency Lending was the joint runner up in the race to be considered the most
innovative lender by beneficial owners, securing 13.6% of the votes. One in the
Americas praised it for its “approach to
lending in emerging markets” and its “willingness to share market research and
insights”. In Europe it was singled out for being “close to markets and the
changing regulatory landscape” and another was impressed by its “excellent
coverage and flexible approach”.
Deutsche
Agency Lending achieved its best rankings in the weighted third-party agency
lender tables. It secured second spot in Emea as well as global total. All of its
respondents were customers of its third-party business – but the firm does also
offer custodial lending.
Its best
category scores were likewise in the third-party weighted data tables. It
achieved the top spot in collateral management (which it also did in raw data)
and second place in a further eight categories.
One beneficial owner in the Americas commented that Deutsche Agency Lending “delivered
mostly according to the plan, good job”. Another added: “This agent provides
excellent client service. As an affiliated lending agent, they are held to a
higher standard than we would typical hold a lending agent to and they always
deliver exceptional client service and earnings.
BNP Paribas
BNP Paribas only qualified in Emea so was not eligible for inclusion in many of the tables. It did best in the custodial lender tables, where it secured second place in the weighted Emea table. It did receive some third-party responses; not enough to qualify for the dedicated tables but enough to influence its all lenders scores.
“BNP Paribas has the potential to have a great agency lending product,” commented one European beneficial owner. “Recent improvements to both their reporting and global market coverage have really helped to improve their offering among the competition. The relationship management is excellent and the programme customisation that they are offer is very good. Their programme definitely offers the flexibility that we require to ensure that securities lending remains a viable investment choice.”
BNP Paribas was considered the most innovative agent lender by 2.9% of
respondents, with one in Europe commenting that it is “generating very good fees in a difficult environment”.
MOST IMPROVED
The most improved agent lender is defined by the firm that improved its all lenders average score by more than any other firm that qualified in 2014. The winner this year on the weighted side was JPMorgan, which improved its score by 0.57. The runner up was RBC Investor & Treasury Services. The corresponding winner in the raw data tables was RBC Investor & Treasury Services, with an improvement of 0.47. The runner up was JPMorgan.
MARKET PROFILE
Any individual representing an entity with a securities
lending programme was eligible to complete the survey. A slight majority of
respondents were asset managers, accounting for 50.9%, and further substantial
proportions represented public pension funds (18.1%) and insurance companies
(12.1%). Private pension funds, corporations, sovereign
wealth funds and central banks each accounted for less than 5%.
Portfolios of beneficial
owners in the survey were predominantly active investments, 71.7%, with the
remainder passive, 28.3%.
A substantial majority of beneficial owners use just one provider, 66.4%. Beyond that, 17.3% use two, 7.8% use three and 4.3% use four. There were also entities that used more than ten, but these represented just 4.3% of respondents. The sizes of lendable portfolios ranged from less than $250m (4.3%) to more than $50bn (20.7%). While the sample was biased to the $0-5bn range, accounting for 26.7%, there was otherwise a fairly even distribution of values up to $50bn. Of these lendable portfolios, the approximate value of assets typically on loan was approximately $1.5bn.
The composition of the assets typically out on loan were divided fairly evenly between equities and fixed income, but a slightly U-shaped distribution i.e. there were above average numbers of respondents that concentrated entirely (or very close to entirely) on equities (26.3%) or fixed income (14.3%).
Respondents overwhelmingly reported that the fee split had not been impacted as a result of Basel III and its potential effect on the cost of indemnification – 96.6% said that the fee split had not changed. This is just as well as 60.5% of respondents stated that they would close their programme if indemnification was no longer provided as part of the arrangement, while 19.3% would continue without indemnification and 20.2% would pay for it.
Respondents also overwhelmingly remained loyal to their providers, with just 12.9% adding new providers. The credit rating of providers remained a key consideration, with 42.2% stating it was extremely important, 48.3% that it is very important and 7.8% that it was moderately important.
Respondents on balance have become slightly less risk averse regarding collateral: while 86.2% maintained the same collateral profile, slightly more stated they had become less restrictive (7.8%) than more restrictive (6%) compared to an exactly neutral balance last year.
The most accepted forms of collateral were cash in US dollars and sovereign debt (both by 60.3% of respondents). Equities (26.7%), cash in euros (21.6%), corporate debt of financials (17.2%, corporate debt ex-financials (11.2%) and cash in GB pounds (10.3%) were the next most commonly accepted, with no other form accepted by more than 10% of respondents.
The survey respondents were are asked which service
categories they considered to be the most important. The lower the ranking
number, the more important the service category. Starting with the most
important:
- Risk management 2.23
- Income generated versus expectation 4.51
- Reporting & transparency 4.79
- Collateral management 4.97
- Settlement & responsiveness to recalls 5.06
- Relationship management/client service 5.54
- Lending programme parameter management 6.82
- Handling of corporate actions/dividends 7.21
- Programme customisation 7.98
- Market coverage (developed) 8.32
- Provision of market & regulatory updates 8.4
- Market coverage (emerging) 9.55
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