BOSTON, Nov. 3, 2000 (PRIMEZONE) -- Old Mutual plc (LSE:OML), the new owner of United Asset Management Corporation, today announced that it has joined with the California Public Employees' Retirement System (CalPERS) to establish eSecLending, LLC, a new firm offering a web-based auction system for securities lending. The new process is designed to meet the needs of large pension funds, mutual funds and other major investors including online custodians.
CalPERS and eSecLending have successfully held their first auction by telephone, during which they beta tested the website software. Based on the demonstrated efficiency of the process, CalPERS believes that it can nearly double the annual return it has previously earned from its lending program. Certain investment management firms within the Old Mutual family of companies are expected to join CalPERS in subsequent auctions. CalPERS is the nation's largest public pension fund, and other large pension funds will be invited to participate in future auctions as well.
Securities lending is a portfolio strategy in which institutional investors, including pension funds and mutual funds, lend securities to earn incremental income on their holdings. Agents such as large custodian banks have historically served as middlemen in securities lending, taking a negotiated portion of the income generated in the lending process. Lending securities plays an important role in the global financial system, and the size of the market is estimated at between $1.5 trillion and $2 trillion worldwide.
ESecLending's auction system, which is the first of its kind in the U.S. industry, will:
-- Bring together lenders, borrowers and brokers in one place via
the web;
-- Allow price discovery by utilizing a multiple-stage bidding
process and offering lendable securities packaged in discrete
tranches; and
-- Capture a large centralized pool of data on securities lending
performance that will be used for a comprehensive benchmarking
system.
"Securities lending currently takes place in a very inefficient marketplace," said Ty Danco, President of eSecLending, LLC. "We intend to change this through an auction process that offers clear benefits to lenders and borrowers. Our operation is highly scaleable. We're very fortunate to be starting with such a large lending base, and we look forward to welcoming the participation of additional large institutional investors as we progress."
"One of CalPERS's core values is to strive to be the best in everything we do," said Michael Flaherman, Chair of CalPERS Investment Committee. "We're particularly excited to be working with eSecLending because we believe it's going to redefine the securities lending marketplace. It promises to increase market efficiency by bringing together lenders, borrowers and brokers across the world. What's more, by enabling institutional lenders to retain a larger share of the revenues associated with the lending process, their plan participants and investors will benefit from enhanced performance."
"We're delighted to announce the formation of eSecLending and its successful first auction. We see securities lending and collateral management services as a key part of Old Mutual's global asset management business strategy," said Eric Anstee, Chief Executive of Old Mutual Financial Services. "These services add value to our asset management businesses through enhanced portfolio performance for our clients and funds."
Burlington, Vt.-based eSecLending serves as the primary developer of the web platform and software, and is responsible for staffing and managing the auction process. CalPERS is a minority partner in eSecLending and contributes its considerable securities lending expertise to the venture as well as its huge securities lending program.
Old Mutual plc and CalPERS
Old Mutual plc (LSE:OML), the majority owner of eSecLending, is an international financial services group based in London with an integrated portfolio of activities in asset management, life insurance, banking and general insurance. Old Mutual has substantial collateral management and securities-lending brokerage activities in Europe through its subsidiary Gerrard Group plc. Through Old Mutual Asset Managers, it is the leading principal and arranger in securities lending in southern Africa. Most notably, Old Mutual completed the acquisition of U.S.-based United Asset Management Corporation last month.
More information about these firms is available at www.eSecLending.com, www.oldmutual.com, and www.uam.oldmutual.com. CalPERS is the nation's largest public pension fund, with assets totaling more than $177 billion. The System provides retirement and health benefits to more than 1.2 million State and local public employees and their families. For further information about CalPERS, please visit the System's web site at www.calpers.ca.gov.