- Alastair O’Dell, editor, Global Investor/ISF
- Naomi Heatley, DC product manager USS Investment Management
- Matthew Chessum, investment dealer, Aberdeen Asset Management
- Fuad Ahmed, investment management executive, Phoenix Group
- John Arnesen, global head of agency lending, BNP Paribas Securities Services
- Don D’Eramo, managing director, head securities finance, RBC I&TS
- Stephen Kiely, head of new business development, securities finance, EMEA, BNY Mellon
- Nancy Allen, director, DataLend Product Owner
O’Dell: To what extent are beneficial owners using and benefiting from the increasing availability of data?
Allen: The market is undergoing a tremendous amount of change this year, change we have been discussing for a number of years. To gain transparency into their programme and across their agents, beneficial owners are turning to data providers to quantify market trends and pricing.
Data products are becoming ever more embedded. Data is being treated as an asset – an asset that assists both agents and beneficial owners in navigating a changing market environment and in more efficiently managing their loan portfolios.
D’Eramo: We have an increasing number of data providers, which is a good thing. Standardised data is important for beneficial owners, ensuring output is truly reflective and the right risk parameters are available. It has allowed for much richer conversations with clients.
Arnesen: You need to understand data before looking at it. As
If I lend a security, its value is driven by collateral. Unfortunately, the way tri-party agent collateral managers operate, you have to assume you are receiving the worst form of permissible collateral. When I take a very low-rated corporate bond I am really financing that for the borrower – but that does not show up in the lending fee. That kind of granularity is the next phase.
Allen: Absolutely. The fee on a loan should reflect the lowest common denominator of collateral that is acceptable within that trade. At this point, from a performance perspective, we should focus on that level of granularity.
D’Eramo: There’s still value even if you’re looking at a data set of one, whether it’s transaction price transparency, identifying trends or being able to delineate returns verses risk-adjusted performance. Due to the nature of the market, standardisation is difficult. The data providers are doing a very good job setting levels tailored to the unique environment of securities lending.
Chessum: I’m interested in seeing which specials trade and where I am in comparison to the market. I need to make sure we’re making a decent return. I’d encourage all beneficial owners to issue an RFP/RFI every three-to-five years to benchmark their agent lender.
D’Eramo: It is less about benchmarking in a performance range and more about triggering discussion about risk appetite. We can clearly delineate collateral types and link that to returns. They may be fine with their performance relative to their peers, as data means they can identify additional performance if they pull a certain lever. That enrichment, clarity and transparency is allowing a more focussed approach to setting goals.