US - The US$132bn California Public Employees' Retirement System, the world's largest, has completed a multi-billion dollar securities lending auction.
The scheme auctioned US$48bn in US equities and US$7bn of international equities through web-based auction platform eSecLending, which is owned by financial services firm Old Mutual.
Successful bidders for US equities included Credit Suisse First Boston, Deutsche Bank Securities and Lehman Brothers. The first three were also the principal borrowers for international equities, along with JP Morgan. CalPERS also awarded assets to Boston Global Advisors and Metropolitan West Securities for international equities and US equities respectively on an agency basis.
Exclusive borrowing rights and agency awards expire after 12-month terms, after which rights to the securities will be re-auctioned.
On the US equities auction, senior investment officer for CalPERS global fixed income program, Curtis Ishii, said: “The success of the December US equity auction provides CalPERS with a strong base for 2003.
“The winning bids have locked in excellent, dependable returns for our public employees and their families. The auction process has proven that it can consistently deliver premium returns to our beneficiaries and efficiently match our assets with multiple borrowers.”
Calpers is keen to inflate assets after its portfolio suffered a blow from falling equity markets last year. US stocks returned -16.8%, international stocks declined -10.2% during the twelve months ending June 30, 2002 .
Securities lending involves institutional investors lending securities to earn incremental income on their holdings. The size of the market is estimated to be between US$1.5trn-US$2trn worldwide.
But the practice has also courted controversy in recent months after its was accused by some observers of adding to market instability.
The UK’s J. Sainsbury Pension & Death Benefit Scheme manager Geof Pearson said in an earlier report that schemes were just as much to blame for market volatility as hedge fund managers who engage in short selling.
He added that pension funds are the primary source for the securities lending market and should consider their role as “aiding and abetting the hedge funds”.
Professional Pensions is looking to update its list of pensions master trusts in the UK ahead of authorisation. Can you help?
RPMI Railpen is in the next step in the journey towards achieving cost disclosure. Victoria Bell tells Stephanie Baxter about taking part in the Cost Transparency Initiative's pilot phase
Interserve's numerous defined benefit (DB) schemes have retained a sponsor link after the company entered into administration and was sold.
Chris Hannon has been named chairman of the Railways Pensions Trustee Company after a unanimous vote of approval from its board last week.