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Fidelity Takes In-House Securities Lending Platform to the Broader Market

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What You Need to Know

  • Fidelity Agency Lending is being offered to asset managers and other institutions, and can help boost revenues.
  • The securities lending program is one of many examples of Fidelity commercializing a capability built in-house.
  • Fidelity's global equity trading head said it “could meaningfully improve the overall returns that we deliver to our fund shareholders.”

Fidelity Investments has launched a digital securities lending platform for asset managers and other institutions.

Fidelity Agency Lending, as the platform is called, offers those institutions what Fidelity has essentially been doing for its own funds since mid-2019 after it dropped Goldman Sachs as the manager of its security lending business and brought the business in-house. That move boosted Fidelity’s lending revenues by about 10% — the fee it had been paying Goldman; this latest initiative will add even more revenues for the diversified financial services firm, which is  operating in an extremely competitive low-fund-fee environment.

“Current market dynamics are compelling institutions to take a more active role in securities lending programs to find competitive advantage,” said Justin Aldridge, head of Fidelity Agency Lending. “Firms are looking for an agent lender with both new technology and the proven ability to serve large, complex institutions, and we’re excited to offer that to the marketplace.”

Aldridge noted that Fidelity’s lending platform is one of many examples of Fidelity commercializing the use of a sophisticated capability it first established in-house.

David Lane, head of global equity trading at Fidelity’s asset management division, said the lending program “could meaningfully improve the overall returns that we deliver to our fund shareholders.”

Asset managers, including also BlackRock and Vanguard, lend securities to short sellers and other investors to boost revenues in an increasingly competitive market where fund fees are often mere hundredths of a percent. The Fidelity platform will lend securities from its mutual funds and ETFs.

The Fidelity Agency lending platform includes AI-powered loan decision functionality, the ability  to fully customize lending parameters in an automated fashion, real-time connectivity, automated reconciliation with many of the largest global custodians and access to Fidelity’s  proprietary risk models to monitor counter-party risk and exposure.

The lending platform will compete with programs from State Street, JPMorgan and other banks.

Fidelity oversees $10.3 trillion in assets, including $3.9 trillion in discretionary assets.

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