Boaz Yaari – Founder & CEO at Sharegain
2018 blew winds of change across global markets. Much of the ten years prior could be characterised by smooth and stable growth in asset prices. 2018 by comparison, was a tempestuous year, as volatility re-affirmed itself and global equity indices fell. In the main, there-emergence of volatility was met with concern. Many asset managers and investment banks including HSBC and BNP Paribas, highlighted market volatility at the end of ‘18 as a key driver for diminishing returns. Some analysts even heralded that 2019 will see the beginning of the next global recession, following the rough seas in Q4 2018.However, asset owners participating in securities lending will have a different perspective on 2018, as last year brought surges in revenue which surpassed $10bn, the highest annual figure since 2008.
In the last decade, capital markets have battled with the challenge of regaining trust, whilst complying with vast swathes of new regulation. The securities lending industry has suffered more than most during this battle. Whilst market capitalisation of global equities has trebled since its 2008 trough, the value of securities on-loan is still well below its 2007 highs, representing a ‘real’ shrinkage in the size of the industry. So why has the securities lending industry failed to keep pace with the rest of the market? What wider lessons can be taken from this and does this spike in revenue signal the beginning of a new era in the industry?
Let’s start with where the house of cards tumbled in ’08. Prior to ’08,securities lending grew exponentially, and the industry opted to increase hiring as opposed to looking for automation to meet this growing demand. Less automation meant higher operational risk. Furthermore, a significant amount of risk was created by an optional secondary activity known as cash-collateral reinvestment. As a result of this activity, and the investments that were made on the back of it, liquidity and financial risk for institutions rose to a level that ultimately threatened wider financial stability.
As the saying goes however, once bitten, twice shy. Following ‘08, the securities lending industry has responded strongly to the risks created by cash-collateral reinvestment. Firstly, and particularly in Europe,most transactions now operate using a non-cash collateral system. This, of course, removes any cash-collateral reinvestment optionality and also has the potential to simplify securities lending for beneficial owners. In addition, post-trade hubs, such as Pirum Systems have emerged and contributed to the removal of former operational risks, by creating an industry standard automated solution and taking securities lending post-trade processes away from Excel spreadsheets and manual input – thereby reducing margins for human error.
So, if the industry appears to have corrected its shortcomings,why has securities lending remained a backwater of capital markets?
Ultimately,we believe that where the securities lending industry has failed is on user experience. Most beneficial owners still view securities lending as too complex, too opaque and not investor friendly. Incumbents have spent the last 10 years automating back-office processes and playing catch up with regulatory change, focusing largely on complying with MiFID (I and II), Basel III and a raft of other reporting and regulatory requirements.Don’t get me wrong, automation of back-office and other manual processes is important, and participants in the industry are no doubt grateful for the reduction in manually-intensive tasks, but ultimately this won’t grow the pie, this will only slow its subsidence.
For securities lending to prosper, the industry must recognise its place and then play to its strengths. For most investors and asset managers, securities lending will never be their primary investment objective and hence they would not want to manage it as a line of business. It can, however, become a secondary-investment objective if extracting additional value from a portfolio can be done with minimal risk and in a simple and transparent manner. In that respect, user-experience is not just a fancy dashboard with buttons and dials. Rather, it is the ability to deliver a simple solution which most investors can ‘set and forget’, retaining full control, transparency and the peace of mind that it won’t come back to bite them.
Put yourself in the shoes of an asset manager who hears about securities lending and wants to start generating those additional returns. Firstly,what they really want to understand is, what’s in it for me?How much money can I make from securities lending?Unfortunately, for most beneficial owners, they may never truly understand what their portfolio is really worth. Securities lending is an OTC, relationship-based and opaque ecosystem that is supported largely by systems that were designed 15-20 years ago. There is little transparency for beneficial owners on what the market price is or its underlying dynamics. Often, beneficial owners settle for a blanket offer of a few basis points across their portfolio – oblivious to its hidden gems and whether they’re getting a fair deal.
If you, as an asset manager,are willing to sacrifice and compromise on understanding your upside, you would still need to understand a host of jargon and complications. What’s the difference between an SLAA, GMSLA and a CoMMA? Am I safer if my lending is done under a CCP model, full transfer of title or pledge structure?Bilateral vs triparty? All of this ultimately means you cannot fully decipher the risk-reward of securities lending.
If you choose to invest the time and resources into evaluating the different models and discover the ‘right route to market’for you, thereafter begins the long and thankless onboarding process, which can discourage even the bravest and most tenacious investors.In the end,like many other beneficial owners,due to lack of resources or time, you would decide to shy away from the industry, dismissing the additional revenues and the alpha creation altogether.
So what’s next for securities lending?
Whilst the last ten years were burdened bya tunnel-vision focus oncomplying with regulation and automating back-office processes, we believe there is still hope for this industry. By shifting focus towards a relentless pursuit for client-centric user-experience, securities lending could become an opportunity which all investors can benefit from.At the forefront of this pursuit must be greater transparency. SFTR, Securities Financing Transactions Regulation,(coming into effect in 2020) certainly has the potential to act as a catalyst for this. Furthermore, inspiration in this pursuit can be drawn from the democratisation in other areas of capital markets including equities, derivatives and FX. In these areas’ transparency, availability, and ease of use have enabled many new participants to engage, which in turn has increased volumes and liquidity as a whole.
We should also remind ourselves, that notionally every owner of stocks, bonds, and ETFs has the right to lend them and globally there are over $40tn of securities sitting idle, collecting dust instead of collecting income. They belong mainly to private investors, through their banks and online brokers, as well as small and medium asset managers, wealth managers, and robo-advisors that are underserved or completely shut-out of the existing securities lending industry.
By combining robust processes with client-centric user-experience, these beneficial owners could access this industry and its benefits, just like the big financial institutions have been doing for decades. Capturing this opportunity is essential for securities lending to flourish and keep pace with, or even front-run, the wider market.
At Sharegain, we offer a securities lending solution fit for the 21st century, which we have achieved by relentlessly focusing on the user. In doing this, our offering finally brings a fully automated solution that enables investors to define their desired lending terms and lets our tech work for them within these parameters. By introducing the world’s first digital agent lender, we eliminate the need for operational overhead and high proficiency,enabling all investors to benefit from this basic right.Our vision is to fully democratise the securities lending industry, effectively bringing the ‘Airbnb moment’ to the stocks, bonds, and ETFs of EVERY investor.
COVID-19 is changing people’s preferences when it comes to BTL investments
By Jamie Johnson, CEO of FJP Investment
Throughout 2020, investors have had to navigate increasingly treacherous and volatile market conditions as a consequence of the COVID-19 pandemic. No country has been immune to the coronavirus outbreak, particularly here in the UK.
Yet even as the country enters another phased lockdown of sorts, demand for UK property has remained strong. After a brief period of suppressed demand after initial lockdown measures were introduced in late March, the UK’s implementation of the stamp duty land tax (SDLT) holiday triggered a rush in demand for bricks and mortar. As a result, both house prices and transactional activity is rising.
With this new surge in demand resulting in an 18-year-high of UK house price growth, according to the Royal Institute of Charted Surveyors, buy-to-let (BTL) investments have also substantially increased in popularity.
It’s easy to understand why. BTL investments offer landlords both long-term capital growth and regular returns in the form of rental payments. And now, as the SDLT holiday deadline beckons closer, investors keen on taking advantage of the comparative discounts on offer must act quickly.
My advice to those considering a BTL investment in the UK is to understand and appreciate the longstanding market changes that have been brought about by COVID-19. Traditional BTL hotspots are being challenged by a rise in tenant demand for real estate in up-and-coming cities and regions.
For example, the COVID-19 pandemic has resulted in the majority of the workforce working remotely from home. Recent data from property listing site Rightmove makes clear the shift in demand away from central London and towards less densely populated regions; with areas like Cambridge and Oxford seeing 76% and 64% more rental searches respectively and searches in areas like Earl’s Court dropping by 40%.
This is the clear result of previously London-based professionals realising the benefits of working from home. As businesses identify the financial drawbacks and COVID contagion risks of having all their staff physically present five days a week, employers will seek out smaller commercial workspaces.
At the same time, we are also seeing workers looking to rent larger, cheaper properties that might be further away from their office. This is due to the fact that they are unlikely to need to commute every working day to their office, even once the COVID-19 outbreak has been contained.
But, where exactly are the best larger, cheaper properties to be found? Where are the UK’s emerging BTL hotspots that need to be on the radar of prospective investors? I explore these pertinent questions below.
Those who have been closely following the UK’s housing market will know just how primed Liverpool is for BTL investment. As a key recipient of the UK Government’s Northern Powerhouse funding, and with massive developments like Liverpool Waters and Wirral Waters soon to be completed, the city’s housing supply is ready to meet the demands of those taking part in the aforementioned London professional exodus.
With Liverpool constantly ranking No.1 in rankings of UK cities for BTL investment, it’s evident why investors would be keen on completing purchases of Liverpool property before the end of the SDLT holiday. Though even after the SDLT holiday ends, there’re still plenty of reasons to be optimistic about Liverpudlian BTL investment. Prime Minister Boris Johnson’s government is firmly committed to ‘levelling up’ the North of England through regional regeneration, and planned high speed rail connections between Liverpool and other northern cities will only add to the investment potential of the city.
Although Liverpool boasts the highest rental yields for BTL landlords in real terms, Leeds was recently named the most profitable city to become a landlord in the whole of the UK by CIA landlord. By evaluating numerous metrics; including mortgage costs, average rent, average monthly landlord costs and average property prices, they determined that Leeds was the best city for potential buyers to make their first foray into BTL investment.
And, looking at recent trends, it’s easy to see why. Leeds may benefit more from the London exodus than other cities due to its unique position of being a ‘brain gain city’, i.e. one where more students remain after graduation than move away. As a result, it boasts the largest financial services sector in the nation after London, making it an ideal locale for employers in the financial services sector who are seeking cheaper commercial rent outside of London; likely bringing investment and employees with them.
With its strong urban economy likely to be bolstered by its designation as a ‘Northern Powerhouse’ leading business hub, Leeds is ideally positioned for BTL investment over the long-term.
And finally, the capital of Wales brings much to the table when deciding between different BTL investment destinations. With a metropolitan area population of over 1.1 million residents, forecasted to grow by 20% by 2035, demand for property in the city is set to rapidly increase over the next decade. Those able to capitalise on this population growth will be able to access considerable long-term investment opportunities – as recent reports suggest.
Thankfully, it’s unlikely that there’ll be any shortage of housing supply in Cardiff for BTL investors to invest in. Cardiff Bay has emerged as Europe’s largest waterfront development, and the upcoming Central Quay and £500m coastal developments will assist in attracting further investment into the city.
BTL remains a sound investment opportunity
COVID-19 has made evident just how resilient British real estate is as an investment asset. By offering the best of both worlds, namely long-term capital growth and regular rental returns, BTL has successfully remained an attractive and popular investment choice. And, with demand for housing still outstripping supply, the market need for rental accommodation looks set to only grow.
COVID-19 has permanently changed the UK’s housing market and, as explained above, new BTL hotspots are surely due to emerge over the next year. With renters seeking out larger homes in cheaper areas, flexible working patterns will forever change the landscape of the UK’s residential real estate market, and those able to capitalise on it may benefit hugely as a result.
Global private wealth holders set to almost double impact investing allocation over next five years
- High net worth individuals, families, family offices, and foundations plan to increase their allocation to impact investing from 20 per cent of their portfolios in 2019 to 35 per cent by 2025.
- A quarter (27 per cent) of all investors expect to move to more than 50 per cent invested for impact within five years.
- Nine-in-10 (87 per cent) investors say climate change influences their investment choices, while over half (52 per cent) view climate change as the greatest threat to the world.
- Seven-in-10 (69 per cent) say COVID-19 has affected their views of investing and the economy, while 66 per cent say that it is likely to broaden their risk assessment to include more environmental, social, and governance (ESG) factors.
A new research report launched by Campden Wealth, Global Impact Solutions Today (GIST), and Barclays Private Bank reveals the growth in leading private wealth holders and family offices investing for positive social and environment impact, with the average portfolio allocation set to almost double, increasing from 20 per cent in 2019 to 35 per cent by 2025.
Investing for Global Impact: A Power for Good, now in its seventh year, provides unique insight into the attitudes and actions of a sample of the world’s wealthiest individuals, families, family offices, and their foundations when it comes to generating positive impact with their capital. As a leading global benchmark for those interested in impact investing and philanthropy, data for this study was collected from over 300 respondents from 41 countries, with an average net worth of $876 million and cumulative net worth estimated at $264 billion. Additionally, case studies with prominent investors and philanthropists also feature in the report.
Private wealth holders are increasingly engaging in impact investing
The proportion of the wealthy investors allocating more than 20 per cent of their portfolio to impact investing is expected to increase from 27 per cent to 39 per cent as soon as next year, and a quarter (27 per cent) are predicting to allocate more than 50 per cent within five years from now. As such, the average portfolio allocation to impact investing amongst these investors is expected to increase from 20 per cent in 2019 to 35 per cent by 2025.
Driving this uplift is the belief of two-in-five respondents (38 per cent) that they have a responsibility to make the world a better place. A quarter (24 per cent) believe that this approach will lead to better returns and risk profiles, and 26 per cent are looking to show that family wealth can create positive outcomes around the world.
Climate change considered the greatest threat to the world
The majority of investors (82 per cent) feel a responsibility to support global social and environmental initiatives. Specifically, just over half (52 per cent) believe that the long-term impacts of climate change pose the greatest threat to the world, and roughly four-in-five (83 per cent) are already concerned with the effects of climate change seen globally. These concerns mean that nine-in-10 (87 per cent) say that climate change plays a part in their investment choices.
While just over half (53 per cent) of these wealthy investors say Europe is leading the world in carbon neutral initiatives, 86 per cent want governments to do more, but at the same time, four-in-five (81 per cent) recognise the role of private capital in addressing climate change. With this in mind, two-in-five (39 per cent) would like to know the carbon footprint of their portfolio to inform their investing, while roughly one-in-five (19 per cent) already have this information.
Of those who do know their carbon footprint data, 13 per cent consider it as they make further investments and 9 per cent use it to actively reduce it towards a target, showing that more information around carbon emissions helps create greater positive impact.
COVID-19 is acting as a ‘wake-up call’ and driving interest in sustainable investing
COVID-19 has made individuals increasingly aware of the world around them, with seven-in-10 (69 per cent) respondents saying that it has affected their views of investing and the economy. Nearly half (49 per cent) believe that investing will not return to ‘normal’, even after the crisis subsides, and one-in-five (22 per cent) think that the impact investing market is about to ‘take off’.
In a sign that the implications for impact investing will be long lasting, two-thirds (66 per cent) say that they are likely to broaden their risk assessment to include more ESG factors, while 64 per cent insist that the crisis will force a deeper reconsideration of shareholder capitalism, and 69 per cent agree that how companies behave during the crisis will determine their investment attractiveness afterwards.
Healthcare ranked the second most popular impact sector, and a notable 84 per cent say that they plan to increase their investment to healthcare over the coming year, a proportion that outstrips all others.
Dr. Rebecca Gooch, Director of Research at Campden Wealth:
“Globally, over $30 trillion is now being invested sustainably and this trend towards responsible investment is catching on rapidly within the private wealth community. A notable proportion of wealth holders are now engaged and there are expectations, particularly since COVID-19, for a considerable hike in their investment over the coming years.
“Wealth holders see the challenging state of the world, and the risks and vulnerabilities both individuals and businesses face due to COVID-19 and climate change, and they want to act. Here is where smart investment and deep pockets can make a real difference in impact and ESG investment. For many, responsible investing is not only the ethical thing to do, but it is simply good business practice.”
Gamil de Chadarevian, Founder, Global Impact Solutions Today (GIST)
“There has never been a better time to fast-track investment for sustainable progress and smart innovation to generate profound impact for people and planet.
“We launched the report to catalyse and accelerate this transformation by serving as the leading knowledge platform to broaden understanding, identify trends, and provide a ‘peer-to-peer’ benchmark for investors in the field.”
Damian Payiatakis, Head of Sustainable and Impact Investing, Barclays Private Bank:
“Investors are being challenged to safely pilot their family’s lives and their portfolios through the disruptions of 2020, and it means they are having more discussions about the future – how their family’s wealth can reflect more of their values and the role they want to play in society.
“Families are considering the impact of their capital and then increasingly taking action, by allocating more towards solving our urgent global societal and environmental issues. We see that investors wanting to make this shift are looking for guidance to navigate the rapidly evolving field and to access high-quality opportunities that can deliver financially and with positive outcomes.”
Can Covid-19 provide opportunities to change stakeholder relationships for good?
By Paul Williams, Head of Production and Planning, Speak Media
When the coronavirus crisis hit the UK in March, businesses faced the immediate challenge of making sure that their content output was relevant to a strange and unsettling new landscape.
But, even as lockdown eases, could there be lasting implications for how companies communicate with their stakeholders? In a recent survey created by Speak Media and the Public Relations and Communications Association (PRCA), 93% of respondents said that the post-Covid world was likely to bring new opportunities for businesses to connect with their audiences – and pointed to a range of ways in which their relationships could change for good.
Here are four ways in which your relationships with stakeholders could evolve.
- Adapting to the needs of your customer base
The ‘new normal’ might be starting to feel more, well, normal – but that doesn’t mean your brand should revert to a pre-Covid content comfort zone. Nearly 80% of the comms leaders who took part in our survey said that organisations have an opportunity to become more relevant by adapting to the shifting needs of their customer base.
It is likely that the challenges and anxieties facing your stakeholders have changed significantly, so don’t assume customer interests are the same as they were before the pandemic. Do your research, communicate with your audience and look at key analytics data to identify areas you can provide real value to your readership – then focus your content efforts on them.
For example, sports brand Nike garnered positive attention for its ‘Play Inside’ marketing message – which not only encouraged its community to stay indoors at the height of the pandemic, but also gave them the tools they needed to workout at home. Meanwhile, in the financial services sector, Barclays has offered customers and clients who are facing coronavirus-related challenges access to insights from senior colleagues through its main digital hub, home.barclays.
- Creating meaningful connections
Close to 70% of our respondents cited creating “deeper and more meaningful connections with different stakeholder groups” as an important opportunity for brands. The last few months have placed a new emphasis on authentic brand identities and the values behind them. As consumers renew their interest in the broader significance of companies, there’s an opportunity to highlight your brand’s story, what it stands for – and ultimately create a more profound connection with you audience.
- Using your brand as a platform for positive change
It is not enough to just proclaim your principles in generic statements – your brand also needs to demonstrate how it is putting its values into action. According to our survey, 75% of comms professionals think the coronavirus crisis gives brands the chance to “serve society better and use their business as a platform for positive change”.
Your content output should become a platform that explains how your brand is making a difference – whether it is by reporting on events, highlighting colleague stories, publishing a think piece on how a problem could be resolved, or giving your readership the resources they need to take action themselves. Sainsbury’s for example has used the news section of its corporate website to post updates about a new partnership with charity FareShare, which will allow customers to help get groceries to people in need.
- Become a trusted source of expertise
The pandemic has created an atmosphere of uncertainty in almost every industry. It is therefore likely that your audience will be seeking information about the current landscape and how it could evolve.
Show that you deserve their trust by creating content that provides concrete value to your audience on a range of topics that relate to your brand – from reports and expert opinions to advice or guidance.
It is more important than ever to ensure information is detailed, accurate, but accessible enough to appeal to the knowledge levels of your varied stakeholders. Brand content from Vodafone, for instance, has recently covered topics such as making the most of tech while working from home and how smartphones could help find ways of treating Covid-19. And insurer Aviva has published engaging editorial perspectives on effective leadership while working remotely through its podcast.
Invest time in showcasing the expertise already present in your organisation and make sure you choose the best format to inform, engage and help your audience.
Foster meaningful relationships
It is crucial that comms leaders look closely at their content to make sure they place the concerns of their readership at the forefront of everything they do. The current situation may give brands opportunities to foster real and meaningful relationships with their stakeholders – but it is also increasingly clear that those who don’t take action to adjust their comms strategies risk losing their audience’s trust.
Reconnecting the retail brain: learning from the octopus
By John Malpass, Retail Consultancy Practice Lead at Teradata An octopus has nine brains: one for each tentacle and plus one at...
How robotic technology will disrupt the manufacturing industry
By Marga Hoek, author of The Trillion Dollar Shift Robotics technology has the potential to disrupt industries across all sectors...
RPA, the software robots that finance and banking professionals need to hear about.
By Rory Gray, Vice President of Sales at leading software automation firm, UiPath, explains what role Robotic Process Automation (RPA)...
The rise of nomadic work: how to turn your remote team into a creative force
By Paige Erickson, EMEA MD, Workfront During the first stage of the lockdown in the spring, almost half of Brits...
The value of digital identity in payments
By Vince Graziani, CEO, IDEX Biometrics ASA In ever more challenging times, the payments industry needs to maintain trust by...
Consumers in the COVID era can learn to embrace strong customer authentication
By Ed Whitehead, Signifyd managing director, EMEA The changes that COVID-19 has caused in rapid succession make it hard to...
How NatWest used social media to better target its communications
By DuBose Cole, Head of Strategy, VaynerMedia London For banks, it is imperative to reach their existing – and potential...
It’s time to press ‘reset’ on travel and expense processes
By Rudy Daniello, EVP of Corporations, Amadeus Travel & Expenses(T&E) is a large spend category for companies across the globe....
Covid-19 and the rise of remote payment fraud: how do we catch a digital thief?
By Evgenia Loginova, co-founder and co-CEO of Radar Payments Covid -19 is finding different ways to hurt our finances –...
Effective financial planning will secure businesses a certain future
By Simon Bittlestone, CEO of financial analytics company Metapraxis 2020 has been an unpredictable year, bringing further volatility to already...