Xavier Bouthors, senior investment manager, treasury, at NN Investment Partners (NNIP), took part in our securities lending roundtable, now online and part of a wider special report.
In comments below, he mentions priority issues and advances in technology.
Also joining us was Mick Chadwick, global head of securities finance at Aviva Investors.
Funds Europe – What have been the priority issues that have shaped your securities lending strategy over the past 12 months? And what have been the major discussion points around the water cooler?
Bouthors: A priority during 2019 has been to ensure that our securities lending programme aligns with NN IP’s ongoing commitment to sustainable and impact investing. It is essential that all assets and collateral utilised in the programme meet our ESG standards and sustainability guidelines.
A second project focuses on collateral optimisation – on ensuring we mobilise and allocate collateral efficiently across the product areas and geographical locations in which NN IP is active. We have launched a product called the ‘collateral channel’ focused on delivering efficient collateral management across our business and to clients.
In line with others’ comments, revenue from the equity component of our securities lending programme has been down for the year to date relative to 2018. On the positive side, we have been building our lending activity in high yield debt and emerging market debt.
Funds Europe – How are borrowers and lenders using data to monitor performance across their securities lending programmes and to drive their decision-making?
Bouthors: The range and quality of data has improved, but we are mainly talking about equities. For fixed income investors – those holding high yield debt or emerging market debt for example – the data is still unsatisfactory. One possible reason is that a lot of this is traded to access liquidity via the repo market and there is not a strong pool of data for these instruments. We feel this is one area that can improve substantially.
Funds Europe – How are advances in technology, data engineering and data science delivering innovation to securities lending?
Bouthors: Parts of the industry are not ready to change. That has been our experience from some initiatives that we have been working on. The beneficial owners are often open to changes driven by innovation, but the borrower side of the industry can be protective of its franchise and there is a lack of transparency in this segment. When change does come, again, we expect that it may be the securities financing side that moves faster than the securities lending sector pushed by collateral obligations.
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