Investment Operations

Pension Plans Unite for Securities Lending and Repo Trading

Four leading pension plans, California Public Employees’ Retirement System (CalPERS), Healthcare of Ontario Pension Plan (HOOPP), Ohio Public Employees Retirement System (OPERS), and State of Wisconsin Investment Board (SWIB) along with eSecLending, Osler, Hoskin & Harcourt LLP and Credit Benchmark, have come together to create the Global Peer Financing Association (GPFA).

According to a joint statement, the shared goal of the GPFA is to create a more efficient and actionable way to increase and encourage peer-to-peer trading activity in the securities lending and repo markets for the benefit of asset owners.

According to industry analysts, beneficial owners are increasingly turning to one another to engage in securities lending and repo transactions to supplement traditional banking counterparty trade opportunities. GPFA said it was formed to bring together beneficial owner members with the goal of promoting the development of a more efficient, effective and cost-favorable marketplace for peer securities financing activities, liquidity management and collateral management.

“Over time, we came together as a group of like-minded peers and recognized that there was a need for more information and support related to securities lending and repo activities,” said Dan Kiefer, Investment Manager at CalPERS. “By transacting with our peers, we have been able to increase revenue generated from our securities lending and repo activities while also expanding sources of liquidity for our plan,” Kiefer added.

The members say there are several benefits to be gained from their involvement in peer transactions. “We are diversifying our counterparts and including these highly creditworthy entities while also benefiting from lower costs, increased transparency on the trades and greater information sharing amongst the group,” said Christopher Benish, Managing Analyst at SWIB. “We also like the predictability of demand where balances are more stable than with traditional banking counterparts over month-ends and quarter-ends,” he said.

Jerry May, Senior Portfolio Manager at OPERS, said that GPFA is focused on educating beneficial owners about credit approval solutions for non-rated counterparties and ways to navigate challenges through central connection points that allow peers to trade with each other efficiently. “We recognize each beneficial owner has different factors to consider when evaluating alternative counterparties,” May said. “GPFA has developed a framework of resources to help other peers understand and navigate the approval process as well as the ongoing administration of trades for those that do not have internal resources to support securities lending or repo activity directly,” he added.