US – The largest US pension fund, the California Public Employees’ Retirement System (CalPERS) has awarded investment bank Credit Suisse First Boston (CSFB) exclusive rights to borrow $37bn in equities, the third year in succession that the bank has won the business.
This follows the $48bn of assets auctioned by CalPERS for securities lending purposes through the eSecLending auction process, enabling it to match its assets for lending with borrowers and providing "premium returns" for the fund.
"We are pleased to enter into the third year of this value-added relationship with CSFB," says Curtis Ishii, senior investment officer for that CalPERS global fixed income programme.
Unlike some of its European pension fund counterparts, CalPERS clearly does not have compunctions about this being lent to hedge funds, fearing the increased volatility they attribute to market shorting practices. Commenting on behalf of CSFB and global head of its prime banking department, managing director Art Mbanefo, says that having a "stable supply is paramount in building a strategic partnership with prime brokerage clients".
"CSFB has created a platform called ‘Prime banking’, which combines every service our firm offers to the hedge fund community," The equity portfolios available to the bank are an essential component to deliver this platform. This enables hedge fund clients to act in many of the more illiquid situations in the current market conditions.
The bank adds that having $37bn in equities available does not ensure that it can borrow for every trade, CSFB is in "an enviable position in the supply and demand equation".
** Boston-based global custodian State Street Bank has launched its Financial Digest of Securities lending, which provides a series of articles designed to provide an overview of securities lending principles and practices.
It offers explanations of the key concepts, such as return management, asset liability strategy, credit risk management, liquidity risk management and the application of value-at-risk analysis.
State Street says this is the first of its kind in the industry. "It responds to the need for greater understanding and acceptance of securities lending in today’s competitive global economy," says Ed O’Brien, executive vice president.