S&P Global: Control, Monitor, Understand

Us

2022 was a year marked by market volatility, geopolitical risk, investor uncertainty, and a sharp decline in asset valuations. The securities finance markets offered a counterbalance to the fall in investment returns over the course of the year, as 2022 generated the second highest securities lending revenues since 2008. During the year, the securities finance market generated revenues of over $12.5B (see Fig 1), with over $10B going directly to lenders. This increase of 9% YoY reflects favorable market conditions for securities lending (volatility often provides multiple opportunities for market participants) and a beneficial owner community that has become more engaged and more informed than ever before.

As market valuations and the use of passive investment strategies have increased over recent years, so has the number of market participants engaging in securities lending. After hitting an all-time high of $37 Trillion in 2021, the value of lendable inventories fell throughout 2022 to a low of $29T at the end of December, while the average value of available assets over the year was $31T. As we looked at the client breakdown (see Fig. 2), asset managers were the largest contingent of the lender base owning just over 57% of the total lendable assets available in the market (equating to just over $18B). Pensions funds were the second largest contingent, with just over 19% of all assets, followed by Sovereign Wealth funds (11%) and insurance vehicles (5%).

Despite having a smaller lendable inventory, our data shows that pension funds, as seen in Fig. 3, had the greatest proportion of their assets on loan over the year, 36% ($850.2M) in 2022, falling from 37.2% ($892.6M) in 2021, followed by asset managers, 24.53% ($578.9M)