(December 7, 2011) — eSecLending, a global securities lending agent, announced that it has reached $2.5 trillion in assets auctioned since inception.
“Our growth reflects a natural evolution of the market,” eSecLending’s Co-CEO, Chris Jaynes told aiCIO. “Securities lending started primarily as an operational function as a means for covering failed trades but the market has grown and evolved to where the primary driver of demand today is to facilitate investment management trading and hedging strategies.”
Jaynes continued: “Third party agents have become more and more prevalent. We expect this evolution to continue with increased focus on multiple providers, benchmarking and performance attribution.”
Jerry May, Portfolio Manager for the Ohio Public Employees Retirement System (Ohio PERS) stated in a release: “For Ohio PERS, the eSecLending process provides pre and post execution benchmarking, allowing us to make better informed decisions regarding the optimal route to market for our portfolios. We have been very pleased with the transparency of the process and their ability to customize our lending program. We were particularly impressed with the results of our most recent auction which generated a material increase in intrinsic returns versus our 2010 auction result and market benchmarks.”
Chris Poikonen, Executive Vice President at eSecLending, added: “In the face of a challenging market environment, we are thrilled with the results our auction process continues to generate for our clients. Reaching $2.5 trillion in assets auctioned is a significant milestone for our company and the industry. Over the last eleven years, the power of our process has been proven by the breadth of borrower participation and overall outperformance against market benchmarks. As the market leader in securities lending auctions, we ensure each program remains a bespoke experience for our clients incorporating over 30 markets, more than 40 borrowers and a variety of collateral options.”
In May, aiCIO reported that with recent mandates on the rise for third-party securities lenders, custodians -– the traditional bastion of the business — have been fighting back. Firms such as eSecLending along with Deutsche Bank and Credit Suisse have been touting success in breaking the age old distribution chain of securities lending -– traditionally, beneficial owner to custodian to prime broker to hedge fund and back again. The Frankfurt-based Deutsche had been particularly active: the firm recently secured a five-year mandate from the $25 billion Employees Retirement System of Texas to execute its securities lending program, which built on similar mandates from the Colorado Public Employees Retirement Association and the Missouri State Employees’ Retirement System.
“The one thing about the crisis is that it probably helped foster a better understanding of the true value of securities lending,” Bill Kelly, global head of securities lending client management at BNY Mellon, told aiCIO in May. “Clients came away with absolute clarity about where risks were -– from both the borrower side and the cash-collateral side. This doesn’t mean they’re leaving in droves, though, for third-party lenders.”