In a low interest rates environment, and to better meet its clients’ needs, CACEIS has decided to further develop its securities lending business, thereby enabling investors to increase the returns on their portfolios. The solutions developed over the past two years by the Securities Lending team are now proving increasingly popular among clients.
Until recently, the securities lending activity had seen little in the way of innovation. With regulatory developments in the market, new needs and new opportunities have emerged.
The convergence of requirements to hold liquid, high-quality assets, combined with the sustained downward trend in interest rates, has made securities lending a real source of additional income for investors, with the security of collateralisation techniques.
Dan Copin, Head of Equity Finance at CACEIS, and his team manage this activity on two levels: “We simultaneously handle relationships with clients to assess the potential returns on the loanable assets in their securities portfolios, and with market participants to identify the opportunities that align with our clients’ needs. We initiate and manage market transactions, and advise our clients in order to enable them to make decisions that are in line with their interests”.
CACEIS’s securities lending service is intended for all types of investors. It draws on CACEIS’s expertise as an asset servicer: indepth knowledge of underlyings, regulatory requirements, market practices, and a collateral valuation and margin call management. CACEIS has developed a number of customised solutions that can be adapted to the regulatory framework, the risk profile and the time frame of each investor.
With the Agent scheme, CACEIS negotiates transactions with the market counterparties that the client has selected and to which it accepts direct exposure. CACEIS is responsible for trading, collateralisation and all related flows. The Principal option gives clients the opportunity for CACEIS to be their sole counterparty, therefore assuming the market risk that is strictly assessed.
The Remote Lending service is intended for clients that have securities deposited with more than one custodian. CACEIS can access all portfolios using a secure connection to the systems of the depositaries holding the securities.
Finally, other tailored services are designed to meet specific opportunities and clients' needs.
CACEIS's role is to advise clients. “We provide constant support to our clients by giving them the keys to understanding the market; we monitor their portfolios and make suggestions with the aim of generating additional income for our clients,” explains Donia Rouigueb, Head of Securities Lending & Collateral Management solutions.
The activity includes a significant legal and regulatory component, as well as more reporting obligations. “The ESMA rules for UCITS funds and Solvency II rules for insurers have significantly increased transparency around this activity,” notes Dan Copin.
Recent innovations in CACEIS’s Securities Lending services have proved hugely successful over the last two years. Business has grown strongly, driven by this range of tailor-made services and the support we bring to clients, and by growing interest from market participants, such as institutional investors, that were less accustomed to using these techniques.
CACEIS has consolidated its position as a trusted partner that enables its clients to access the securities lending market and thereby increase the returns on assets held in their portfolios.