Continued market volatility impacted the securities lending sector in 2011 although the industry remains cautiously optimistic.
A host of reasons kept demand at lower levels than 2008, including regulatory uncertainty, balance-sheet constraints, hedge fund deleveraging and decreased shorting activity. And, since the worsening of the eurozone crisis, higher-quality collateral has become more important and also more difficult to obtain. However, the number of beneficial owners remained steady, showing significant faith in the industry. Transparency and best execution are very much in demand, and eSecLending’s auction process gives clients an advantage when obtaining the highest levels of price discovery.
The company is service-driven and provides its clients with experienced relationship managers, as well as the option of having an on-site representative to assist in the daily administration of a client’s programme.
In late 2011, in line with eSecLending’s commitment to innovation, they approached proxy research firm Institutional Shareholder Services (ISS) to develop ProxyValue™ to help clients manage the dual objectives of revenue generation and corporate governance. The service uses date information from ISS and applies securities lending performance information to bring clarity and discipline to the proxy voting management system.
The judges felt its [eSecLending’s] auction process, independence and ability to suit tailor-made client solutions while assisting in the oversight of a multi-provider programme helped keep the securities lender ahead of its competition
The securities lender also has a commendable ability to secure hard-to-borrow assets. It brings together global institutional investors with more than $3 trillion in assets under management, beginning each client’s lending programme with a competitive auction process. In 2011, eSecLending had an average of 10 borrowers participating in each auction.
In 2011, eSecLending also won nine expanded mandates with existing clients and implemented two new clients. Among those, the firm renewed a significant mandate with a US mutual fund investment manager who has more than $200 billion of assets under management. Altogether, the Boston-based firm auctioned more than $230 billion of assets in 2011 and, in December, they reached the milestone of $2.5 trillion assets auctioned since inception.
Following on from eSecLending’s success in this category at last year’s awards, the judges felt its auction process, independence and ability to suit tailor-made client solutions while assisting in the oversight of a multi-provider programme helped keep the securities lender ahead of its competition.
The judges were also impressed with eSecLending’s consistently positive client feedback and its strong innovative stance on pursuing new markets.
As the market remains subdued and regulations impose more changes, beneficial owners will increasingly seek out firms such as eSecLending to assist them with their securities lending requirements.
(Pictured: Chip Hart, Vice-president, eSecLending)
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