Beneficial owners highlight top sec lending challenges

Beneficial owners highlight top sec lending challenges

Global Investor's 2018 beneficial owner survey collected some interesting responses from pension funds, asset managers, central banks and insurance companies across the globe.

We quizzed over 100 asset owners on the biggest securities lending-related challenges ahead. Some of those responses are listed below.

Click here to download a PDF version of the beneficial owner survey results complete with methodology and details on survey respondents. 

“These comments highlight the proactive engagement from the investment management community," said Andy Dyson, chief executive of the International Securities Lending Association (ISLA).

"Set against this backdrop, ISLA will continue with our broader mandate to inform and educate institutional investors around these key issues over the next coming months."

US asset manager:

“Our biggest challenge will be continuing to help clients understand what the lending product is and how it can help their underlying constituents.  Removing the '07/'08 fears from the past is another challenge.”

Asia respondent:

“Agent lenders seems to be more comfortable with a more standard lending agreement to enhance operational efficiency and eventually the return. However, as a conservative client, we request the seemingly more stringent collateral and haircut guidelines which could be implemented at the cost of reduced potential return.”

US asset manager:

“Dividend arbitrage in foreign markets - lending is becoming less attractive with "relief at source". Lower earnings in general, primarily in yield enhancement.”

European fund manager:

“Annual General Meeting (AGM) and Extraordinary General Meeting (EGM) participation. Environmental, Social and Governance (ESG) issues.”

Asia insurance firm:

“Benchmarking. It's hard to compare the performance between lending agents.”

US asset manager:

“Sufficient borrower demand to maintain a securities lending program at scale.”

UK asset manager:

“Reduction in specials/revenue opportunities and fund governance lending restrictions.”

US asset manager:

“Responding agilely to new regulatory requirements and gauging their respective impacts on our lending program.”

European pension fund:

“Enabling lending via a CCP.”

US asset manager:

“Regulatory burden of securities finance reporting/transparency initiatives. For example, the SEC Reporting Modernization Rules and Securities Finance Transaction Reporting (SFTR).”

US pension fund:

“Figuring out peer-to-peer lending and managing the rising interest rate environment.”

European asset manager:

“Market low volatility is a challenge, along with banks’ regulatory requirements.”

US asset manager:

“Switching the cash collateral in to a new fund for better reinvestment rates.”



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