AMX breathes new life into securities lending
29 September 2020
The Asset Management Exchange’s head of product Kerrie Mitchener-Nissen reveals the details of the platform’s new securities lending programme
Image: Pixel-Shot/stock.adobe.com
What does the Asset Management Exchange offer?
The Asset Management Exchange (AMX) launched in February 2017 as an institutional platform for asset managers, institutional investors and their intermediaries. Our aim is to standardise, centralise and streamline the process of investing so it works better for everyone.
For asset managers, we are essentially looking to simplify their lives. We want to take all non-investment activities off their hands and allow them to do what they do best: managing portfolios and generating returns. Among other things, that means we take over many of the time-consuming activities such as managing relationships with third-party service providers, regulators and auditors.
For institutional investors, we provide more transparency and ease of access to funds, and in particular we are concerned that the process has become very expensive for them. A lot of the expense comes from inefficiencies and frictions in the system, such as performing due diligence over many different investment managers, and managing reporting that arrives in many different formats. AMX brings all their funds onto a single platform, giving investors greater purchasing power, reducing duplication of costs, and allowing investors to manage their portfolio on one platform.
We offer products across all asset classes and recently we surpassed $20 billion in assets on the platform.
You left J.P. Morgan to take on your current role in January and oversee the launch ofAMX’s securities lending programme. Where has your career taken you to reach this point?
I was with J.P. Morgan for just over 13 years and I was at Barclays Global Investors for almost eight years before that. During that entire period, I was in product roles. So, for AMX I’ve come on board to pull together all the product functions in one place, from product strategy and product specialist functions, to product management and delivery.
Adding a securities lending programme was always seen as a way to make the most efficient use of the assets on the platform and generate additional income for our investors. The concept of the programme was already underway when I joined.
Who manages AMX’s securities lending business?
The bulk of the work occurs within the operations team in Ireland, alongside the fund administrator and the lending agents. We have an excellent team of highly-experienced professionals based in Ireland. They are responsible for managing the day-to-day activities of the fund and the lending programme, with oversight by the management company AMX Ireland.
Was the creation of this service driven by existing clients on the platform?
It is not about generating revenue for ourselves, but for the investors. In the market, securities lending is widely used for generating additional returns for clients, so we felt it was important to get that up and running on our product suite so our clients could benefit.
It felt more like an important evolution in the services we offer to our clients as something that is becoming quite standard in the market.
In terms of the revenue split, AMX is not taking anything off the top for offering this service. Do you purely see yourselves as facilitators?
Exactly. The market, in general, provides a 70-30 percent revenue split between the fund and the agent lender. We are pushing more in favour of the fund and the investors, so we offer 80-20 percent split. Importantly, we are not taking a fee for this; it is income due to the clients for their fund.
In loaning out those securities, we feel it is right that the fund investors benefit from the fees earned on that. The remaining 20 percent is then the fee that the agent lender takes for performing their function. We did not feel it was appropriate for us to take a fee as well.
Do you have a timeline for phasing the platform out to the funds?
I would envisage that over the next six months we will introduce the securities lending programme to as many funds as is appropriate.
As a young and agile firm, our technology is cloud-based, which is why we were able to move ourselves to a work-from-home model very quickly, and were able to continue with our plans to introduce our securities lending programme.
From that point of view, it has felt like we have been busy throughout this time on the product front. We have weathered the difficult environment well and we were able to pick-up and get rolling very quickly.
The entire asset management industry has adapted remarkably well as it figures out new ways of working remotely.
How has the uptake been?
Given that we introduced the platform right at the start of the summer, the market for lending has been a little soft which was not too surprising. I anticipate it will open up post-summer.
That said, client feedback on the programme has been strong, and as we roll it out more clients have been enquiring about our capabilities. We will add further products to the programme in a phased approach.
Have there been any issues with companies viewing the lending programme as contradictory to their ESG principles?
Our aim is to act as a facilitator for our clients’ environmental, social and governance (ESG) requirements. An increasing number of investors are incorporating ESG investment and stewardship philosophies into their lending practices to ensure that these align.
Where that includes specific requirements in respect of the use of or extent of lending in their portfolio, we are ready and able to support and facilitate that. We want to ensure we have the flexibility for clients to match their ESG policies in whichever way they need us to.
You have made it clear that you are only interested in working with the highest calibre of agent lenders. What’s your criteria for a bank you’ll work with.
We have two agent lenders available to us on the platform. For us, what is most important is the quality of the agent; AMX will only use high-quality agent lenders with a strong credit rating, and we put that entity through our rigorous due diligence process. We are not actively seeking another agent lender, but we are always on the look-out for strong partners as we grow the platform.
The Asset Management Exchange (AMX) launched in February 2017 as an institutional platform for asset managers, institutional investors and their intermediaries. Our aim is to standardise, centralise and streamline the process of investing so it works better for everyone.
For asset managers, we are essentially looking to simplify their lives. We want to take all non-investment activities off their hands and allow them to do what they do best: managing portfolios and generating returns. Among other things, that means we take over many of the time-consuming activities such as managing relationships with third-party service providers, regulators and auditors.
For institutional investors, we provide more transparency and ease of access to funds, and in particular we are concerned that the process has become very expensive for them. A lot of the expense comes from inefficiencies and frictions in the system, such as performing due diligence over many different investment managers, and managing reporting that arrives in many different formats. AMX brings all their funds onto a single platform, giving investors greater purchasing power, reducing duplication of costs, and allowing investors to manage their portfolio on one platform.
We offer products across all asset classes and recently we surpassed $20 billion in assets on the platform.
You left J.P. Morgan to take on your current role in January and oversee the launch ofAMX’s securities lending programme. Where has your career taken you to reach this point?
I was with J.P. Morgan for just over 13 years and I was at Barclays Global Investors for almost eight years before that. During that entire period, I was in product roles. So, for AMX I’ve come on board to pull together all the product functions in one place, from product strategy and product specialist functions, to product management and delivery.
Adding a securities lending programme was always seen as a way to make the most efficient use of the assets on the platform and generate additional income for our investors. The concept of the programme was already underway when I joined.
Who manages AMX’s securities lending business?
The bulk of the work occurs within the operations team in Ireland, alongside the fund administrator and the lending agents. We have an excellent team of highly-experienced professionals based in Ireland. They are responsible for managing the day-to-day activities of the fund and the lending programme, with oversight by the management company AMX Ireland.
Was the creation of this service driven by existing clients on the platform?
It is not about generating revenue for ourselves, but for the investors. In the market, securities lending is widely used for generating additional returns for clients, so we felt it was important to get that up and running on our product suite so our clients could benefit.
It felt more like an important evolution in the services we offer to our clients as something that is becoming quite standard in the market.
In terms of the revenue split, AMX is not taking anything off the top for offering this service. Do you purely see yourselves as facilitators?
Exactly. The market, in general, provides a 70-30 percent revenue split between the fund and the agent lender. We are pushing more in favour of the fund and the investors, so we offer 80-20 percent split. Importantly, we are not taking a fee for this; it is income due to the clients for their fund.
In loaning out those securities, we feel it is right that the fund investors benefit from the fees earned on that. The remaining 20 percent is then the fee that the agent lender takes for performing their function. We did not feel it was appropriate for us to take a fee as well.
Do you have a timeline for phasing the platform out to the funds?
I would envisage that over the next six months we will introduce the securities lending programme to as many funds as is appropriate.
As a young and agile firm, our technology is cloud-based, which is why we were able to move ourselves to a work-from-home model very quickly, and were able to continue with our plans to introduce our securities lending programme.
From that point of view, it has felt like we have been busy throughout this time on the product front. We have weathered the difficult environment well and we were able to pick-up and get rolling very quickly.
The entire asset management industry has adapted remarkably well as it figures out new ways of working remotely.
How has the uptake been?
Given that we introduced the platform right at the start of the summer, the market for lending has been a little soft which was not too surprising. I anticipate it will open up post-summer.
That said, client feedback on the programme has been strong, and as we roll it out more clients have been enquiring about our capabilities. We will add further products to the programme in a phased approach.
Have there been any issues with companies viewing the lending programme as contradictory to their ESG principles?
Our aim is to act as a facilitator for our clients’ environmental, social and governance (ESG) requirements. An increasing number of investors are incorporating ESG investment and stewardship philosophies into their lending practices to ensure that these align.
Where that includes specific requirements in respect of the use of or extent of lending in their portfolio, we are ready and able to support and facilitate that. We want to ensure we have the flexibility for clients to match their ESG policies in whichever way they need us to.
You have made it clear that you are only interested in working with the highest calibre of agent lenders. What’s your criteria for a bank you’ll work with.
We have two agent lenders available to us on the platform. For us, what is most important is the quality of the agent; AMX will only use high-quality agent lenders with a strong credit rating, and we put that entity through our rigorous due diligence process. We are not actively seeking another agent lender, but we are always on the look-out for strong partners as we grow the platform.
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