Can you give us an update on the equity finance business at Natixis?
Dennis Shikar: We have an equity finance offering that is exclusively focused on our clients, and nimble enough to meet their needs in a rapidly changing market environment.
Our ability to leverage our regional expertise and create customised solutions that combine our equity financing products has undoubtedly helped us expand our global footprint. Cultivating mutually beneficial, long-standing relationships with our clients is our primary motivation.
As part of our continued business expansion, we recently hired Anthony Caserta to join our client strategies team. Anthony is a 20-year industry veteran, most recently having served as a managing director of equity finance at S3 Partners.
How do you view the equity finance product at Natixis and your role in it?
Anthony Caserta: Our offering, which combines multiple products to provide global market access, allows us to structure creative, customised equity financing solutions that are beneficial to our broad client base in this increasingly dynamic market environment.
My focus will be on increasing the Natixis brand profile, especially in the US. We are optimally positioned to provide financing solutions to a wide range of clients, including asset managers, insurance companies, hedge funds, pension plans, mutual funds, corporates, banks and dealers. It is very exciting for me to be able to combine my sell-side and buy-side equity finance experience to help expand our offering and our client base.
What are the advantages of your product structure?
Shikar: Traditionally, securities lending, forward trading and collateral trading were separated into different product groups. As expected, regulatory changes have created challenges for each. The fact that we have been able to combine these services on a global basis has certainly helped us structure wrappers to meet our clients’ needs, regardless of the region or underlying currency.
Natixis Synthetic Services is a good illustration of our solution-based capabilities. It is our synthetic prime product, which bundles synthetic exposure, market access, leverage and financing as an integrated solution to substitute physical investments in a portfolio. Natixis is a highly rated, alternative source of financing and diversification of credit risk. Through this structure our clients have access to our global supply of equities, including stable inventories of small and mid-cap securities.
While the fundamental needs of our clients have not changed, the method by which we can satisfy those needs has. The current regulatory environment has placed a premium on creativity and the ability to adapt and act quickly. In this respect, we are extremely well positioned to continue to grow.
There has been a lot of change in equity finance in recent years. Do you see this continuing?
Shikar: We will undoubtedly see this trend not only continue, but do so at an increasing rate. To say the equity finance market has changed over the last ten years is an understatement. There have been material shifts in the landscape that have forced all market participants to adapt. The securities lending product is an excellent example of this. While the fundamental function of facilitating short selling still exists, the market structure and other benefits that the product offers are very different. Market transparency and the push towards central counterparties (CCPs) have never been greater. Securities lending structures are a valuable tool in solving ever-changing client requests.
Caserta: Vastly improved technology, increased transparency and regulatory initiatives have all contributed to the evolution of the equity finance business. However, it would be fair to say that new regulations and collateral requirements have taken the forefront. Consider the effect of these new requirements on the traditional relationship between hedge funds and prime brokers.
Along with balance sheet constraints, the regulatory overhaul has resulted in limited capacity for prime brokers and higher costs for hedge funds. Without question, Natixis’ unique structure and position in the market allows us to partner with both buy-side and sell-side clients to help them overcome these new challenges.
What are some other examples of how the new regulatory initiatives are affecting the equity finance market?
Shikar: Balance sheet optimisation continues to become increasingly important. While the move toward non-cash transactions to limit balance sheet consumption and provide liquidity coverage ratio relief has existed for some time now, we are seeing a shift away from short term funding and toward longer term structures. There is a greater focus on cross asset collateral upgrade transactions as the demand for high quality collateral expands. Additionally, clients are looking more and more for synthetic solutions to their long and short financing needs.
It seems that not only will these trends dominate as we move forward, new ones will certainly emerge. We take great pride in our ability to address the current challenges and structure solutions that anticipate those to come.
What role will Natixis play in the equity finance landscape going forward?
Caserta: The ongoing changes in the regulatory environment will continue to create hurdles for all market participants. Natixis is in a great position to meet the ever changing needs of its clients. Our ability to structure innovative solutions through multiple equity financing products for clients in all segments of the financial markets is exciting. The equity financing landscape continues to evolve and present new challenges for everyone. However, along with these challenges will come new opportunities as well. We will continue to partner with and provide our clients with unique and customised solutions.
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