Lending demand expected to be steady in H1, says BBH
04 January 2019 New York
Image: Shutterstock
Lending demand is expected to be steady in H1 2019, according to Brown Brothers Harriman (BBH).
BBH explained that this year will see a much different economic landscape in the US than the start of last year.
It said: “As we head into 2019, the expectation is that funds will be active as they were to start 2018.”
“For Europe, we expect many of the themes affecting lending demand to spill over into the new year with no respite expected for the retail markets which have suffered throughout 2018.”
Looking back on the latter part of 2018, BBH said: “The recent market volatility has led to a period of de-risking and hedge fund performance in the second half of 2018 has come in below expectations.”
BBH stated that last year the hedge fund market saw minimal outflows as well as many new high-profile start-ups.
The blog stated: “The expectation is for demand to be resilient in H1 this year.”
Discussing the events of last year, BBH highlighted: “The cryptocurrencies bubble burst, global equity markets suffered a torrid time and Tesla Inc nearly went private. It was also a year where we faced unprecedented geopolitical news.”
It said from a securities lending perspective, last year was a “banner year” with global markets offering BBH’s clients opportunities to generate returns.
The financial services firm said: “In H1 2018, steady growth was observed across all regions and global on-loan balances increased by 10 percent over the same period in 2017, more than offsetting a drop in average spread.”
It added: “This, paired with an elevated level of volatility and greater economic uncertainty associated with events such as Brexit, led to a more diversified, stable and long-term set of loan opportunities across the programme compared to 2017 where opportunities were in a concentrated number of stocks.”
“Over the second half of the year, news headlines dominated the markets as trade-tariff based rhetoric, concerns about accelerated monetary policy in the US and a much-anticipated market correction in October caught many investors off guard, erased much of the gains experienced in 2018, and led them to take a ‘risk-off’ stance.”
“This has led to a marked change in the lending environment, with higher volatility in lending volumes and lending fees as fund managers look to de-risk, cut losses or take a ‘sit it out’ attitude”, BBH affirmed.
BBH explained that this year will see a much different economic landscape in the US than the start of last year.
It said: “As we head into 2019, the expectation is that funds will be active as they were to start 2018.”
“For Europe, we expect many of the themes affecting lending demand to spill over into the new year with no respite expected for the retail markets which have suffered throughout 2018.”
Looking back on the latter part of 2018, BBH said: “The recent market volatility has led to a period of de-risking and hedge fund performance in the second half of 2018 has come in below expectations.”
BBH stated that last year the hedge fund market saw minimal outflows as well as many new high-profile start-ups.
The blog stated: “The expectation is for demand to be resilient in H1 this year.”
Discussing the events of last year, BBH highlighted: “The cryptocurrencies bubble burst, global equity markets suffered a torrid time and Tesla Inc nearly went private. It was also a year where we faced unprecedented geopolitical news.”
It said from a securities lending perspective, last year was a “banner year” with global markets offering BBH’s clients opportunities to generate returns.
The financial services firm said: “In H1 2018, steady growth was observed across all regions and global on-loan balances increased by 10 percent over the same period in 2017, more than offsetting a drop in average spread.”
It added: “This, paired with an elevated level of volatility and greater economic uncertainty associated with events such as Brexit, led to a more diversified, stable and long-term set of loan opportunities across the programme compared to 2017 where opportunities were in a concentrated number of stocks.”
“Over the second half of the year, news headlines dominated the markets as trade-tariff based rhetoric, concerns about accelerated monetary policy in the US and a much-anticipated market correction in October caught many investors off guard, erased much of the gains experienced in 2018, and led them to take a ‘risk-off’ stance.”
“This has led to a marked change in the lending environment, with higher volatility in lending volumes and lending fees as fund managers look to de-risk, cut losses or take a ‘sit it out’ attitude”, BBH affirmed.
NO FEE, NO RISK
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
