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Impact Investing

IPE special report May 2018

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Parthenon snaps up securities-lending agent eSecLending

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  • Parthenon snaps up securities-lending agent eSecLending

GLOBAL – Private equity firm Parthenon Capital Partners has acquired securities-lending agent eSecLending at a time when the market begins to recover from the heavy losses of 2007-08.

The acquisition of eSecLending, which has auctioned $3trn (€2.2bn) of securities since its creation in 2000, will help Parthenon "capitalise" on the continued changes underway in the market.

Zach Sadek, principal at Parthenon, said his company was attracted to eSecLending's business model, boasting years of research in securities lending and more than a decade in the financial exchange sector.

As part of the deal, for which financial details have not been disclosed, Chris Jaynes, eSecLending's current co-chief executive, will remain as president.

Craig Starble will join eSecLending as chief executive, making a co-investment in the firm.

He said the merits of a boutique, independent service provider had become "increasingly evident" in the current market environment, "where clients are seeking aligned interests and value-added, tailored solutions".

The securities-lending market is only now showing signs of recovering from the financial crisis of 2007-08.

According to figures from the Bank of England, approximately $13trn of securities would now be available on loan, compared with just $8trn in the second half of 2008, when the market collapsed.

It attributed the market's woes to pension funds and other securities lenders' decision to suspend their securities-lending programmes – temporarily or indefinitely – because of poor returns and concerns over the reinvestment of collateral.

Before the crisis, lenders often reinvested the cash collateral they received in exchange for their securities in short-term money market funds.

But these vehicles started to go under in 2007 due to investments in assets-backed securities and other assets, which were seen as low risk at the time.

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