We have seen two reports recently from US consultants suggesting that there is a significant shift away from securities lending by Beneficial Owners in the US. Today, there is an article in the Financial News entitled "Securities lending back in fashion as investors lift bans". The story quotes representatives of State Street, Citigroup and RBC Dexia who tell variations on the theme of Ben Owners that had suspended lending activity returing to the market. In some cases, these firms point to new entrants to the business.
Both the consultants seemed to have very small samples for their assessments of wider market trends and I raised some doubt at the time as to the true extent of the return. There are many thousands of investors that are in lending programmes around the world, so handfuls can hardly be representative. Certainly there are some departures, of which no doubt a few are meaningful. Also, it is possible that within certain assets classes the pull-backs may have more impact than others.
On the other hand, sceptics might suggest that the custodial lenders have a vested interest in keeping confidence in their programmes and so would necessarily put a positive spin on the situation. Nevertheless, independent data indicates that the reduction in supply that was so evident last Autumn stabilised before the end of the year and the situation hasn't changed much.
Two different stories ... which do you think represents the true picture? Decreased, increased or stayed the same. Vote below:
