ISLA Conference, Central Counterparty & Hedge Fund Performance

ISLA/RMA Conference Next Week
A week from today I will be writing this blog from Barcelona.  There are a number of critical issues for the industry at the moment and I am looking forward to being near the centre of debate and discussion at the conference.  Over 400 attendees from over 150 organisations have now registered, so the numbers are quite strong, and I think reflective of how important people believe the communication aspect of the conference will be.

If you want to set aside some time at the conference, drop me a line at roy@stocklendingtoday.com.  I hope to catch up with the "Three C's" - Colleagues, Customers and Counterparties. If you are there and I haven't met you, please introduce yourself to me - I'm interested in your views. 

Central Counterparty
This Friday LCH.Clearnet will launch a Central Counterparty for securities lending trades executed on SecFinex from this Friday, 19 June. 

You may have read a brief quote of mine in an article in Securities Industry News last week relating to the ISLA consultation document.  As only one sentence of my comments were used, it was difficult for readers to get a context for the quote.

The ISLA report (Download ISLA CCP may 27)is an inital indication of the wishlist from ISLA working group members on what they would like to see as part of a CCP.  As such, the document itself is part review of CCP and part checklist for key features.  While it serves a useful purpose in identifying the issues for the uninformed, it isn't an assessment of specific products that have been proposed by the different vendors or a document that puts CCP into any type of context.

When my kids were younger and put together their Christmas lists to send to Santa Claus, they didn't indicate which items were essential, others that would be "nice to haves" or some that were pie-in-the-sky.  In the same way, this report lists everything as if it was a pre-requisite to participation.  If all products required a similar all-encompassing list of functionality from Day 1 with all market participants being active, nothing new would ever launch.  Loanet didn’t start with 400 participants and it took a considerable amount of time before even the EquiLend owner-consortium was dealing across all the live markets between themselves.  Products grow and develop, they don’t begin fully formed.

While there is no guarantee of success for this central counterparty, or any of the pending offerings, I think the important point to remember is that this is the start of the journey rather than the final destination. 

(By the way, there has been an excellent discussion on the subject of CCP on the Securities Lending Traders Network group on LinkedIn.  If you are involved in the securities lending industry, why not join the group, and the debate?  Apply here.)

Hedge Fund Performance
The Eurekahedge Monthly newsletter came out today and carries quite a lot of positive news.  Most importantly from my point of view is that the industry had net inflows for the first time in ten months – a total of just over $11 billion for the month.  Critically linked to this inflow is the largest amount of capital appreciation from performance - $19 billion.  May was the best aggregate monthly performance in almost a decade and virtually every strategy was in positive territory.  Indeed, Eurekahedge report that 84% of the funds that reported their numbers were positive for May and 74% were up for 2009 YTD.