POWERED BY MOMENTUM MEDIA
Securities lending slowly on the rise
Despite the negative stigma attached to securities lending on the low and most superannuation funds lending, individual portfolio managers are still on the cautious side, BNP Paribas Securities Services believes.
The global custodian said securities lending got roped into the same category as short selling during the global financial crisis and led to a lot of withdrawal.
BNP Paribas Securities Services head of ALMT, FX and agency lending for Asia Pacific, Natalie Floate, said "there was a lot of time spent throughout 2009 and 2010 educating on the differences between short selling and securities lending and then educating on what securities lending actually is".
"My personal belief is that the stigma has decreased at the right level, at board level and some of the trustee board levels. But where we still find issue is when we have one-to-one with some portfolio managers, but it's usually because they have a personal experience or story. 2008 wasn't that long ago," she said.
"Securities lending historically is a way to generate incremental revenue form assets that would otherwise be sitting dormant in custody accounts for long-term asset holders. So people who are buying assets to hold for the long-term to meet liabilities, pension payments, etc.
"We get our monthly statements and know we have international equities, fixed income, and so on. Those assets, once they're bought are sitting in portfolios somewhere. So what securities lending does is introduces a way to lend out the securities on a short-term basis and generate extra revenue that then comes back to the fund. But you obtain all the economic rights of ownership."
BNP Paribas Securities Services global head of agency lending, said the linkage with short-selling in the US was over.
"It will be interesting to see the change with portfolio managers totally getting it with understanding the liquidity argument," he said.
"And then having another conversation which is about ‘if I'm investing on behalf of the members of the fund, and this is something in a risk profile I can absorb and understand and do, do I therefore have a responsibility to enter into it?' That's a very different conversation from 10 years ago."
Recommended for you
A major super fund has defended its use of private markets in a submission to ASIC, asserting that appropriate governance and information-sharing practices are present in both public and private markets.
A member body representing some prominent wealth managers is concerned super funds’ dominance is sidelining small companies in capital markets.
Earlier this month, several Australian superannuation funds fell victim to credential stuffing attacks, which saw a small number of members lose more than $500,000.
Small- to medium-sized funds have become collateral damage in an "imperfect" model for super industry levies, a financial institution has said.
TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
DomaCom DFS Mortgage
93.34 3 y p.a(%)
2
Global X GlobalX FANG+ ETF
36.96 3 y p.a(%)
3
GAM LSA Private Shares AU I
34.22 3 y p.a(%)
4
Fidante Credit Suisse Global Private Equity
29.68 3 y p.a(%)
5
VanEck Video Gaming and eSports ETF (AU)
28.89 3 y p.a(%)
