Optimised collateral management and securities financing is
moving ever closer to the centre of treasury, trading, risk and
operations activities for fund managers and insurers globally.
This has certainly been the case for Mick Chadwick at Aviva
Investors, who oversees securities lending, repo and related
transactions in both fixed income and equity markets on behalf
of all entities of the global insurance giant Aviva.
"As a securities finance desk, our mandate is now two-fold,"
he explains. "On the one hand there’s our
traditional securities lending function, unlocking maximum
value out of assets, which remains important. However, in order
to do that effectively and with maximum efficiency,
we’ve had to develop significant expertise and
invest in infrastructure around collateral management.
"We’re increasingly being called upon to
leverage that expertise for the benefit of other parts of the
firm. It’s an evolution, or extension, from a
traditional securities lending mandate to an all-encompassing
collateral solutions provider to the wider business."
Chadwick’s team of twelve includes traders,
operational support and control staff working closely, looking
after the full lifecycle of securities finance transactions
across fixed income and equities for a number of funds run by
Aviva Investors, as well as the wider insurance
group’s pension fund and all other Aviva units
engaged in lending and borrowing.
The sheer scale and diversity of strategies and risk
appetites of Aviva-owned entities means the firm’s
securities finance desk is no less sophisticated than other
agent lenders. Although Chadwick and his team
aren’t aggressively pitching for third-party
mandates on a standalone basis, there remains a meaningful book
of external business, which is usually embedded as part of a
broader Aviva Investors mandate.
This means the unit is also alert to the full range of wider
industry trends and revenue generating opportunities.
"There’s a certain bifurcation going on within the
securities finance industry," explains Chadwick.
"On one hand you have the collateral transformation
business, where participation levels are high from funds
invested in high-quality liquid assets. For that approach to be
successful, funds need to be flexible around term structures as
well as collateral criteria – but not all funds have
the appropriate risk appetite or liquidity profile and others
are simply not permitted by regulation to participate in that
"At the opposite end there is an ongoing focus on specials,
a lower-volume yet higher margin business where strategies
focus on a specific security or event."
Chadwick argues that his unit has somewhat of a competitive
advantage, given that it is run out of an asset management
business. "We have a direct relationship with the decision
makers of the underlying funds and can be nimble when it comes
to things such as corporate actions and event-driven trading
opportunities. There’s a high level of
coordination, which allows us to move more quickly than some of
our peers in the custody universe."
Before starting at Aviva Investors in 2006, Chadwick spent
most of his career as a borrower in the fixed income markets,
working for various investment banks, building and running repo
desks for Lehman Brothers, UBS and HBOS Treasury Services.
Although regulatory reform and technical innovation have been
ever-present during that time, Chadwick acknowledges that the
pace of change is demanding on market participants and
certainly paves the way for new ways of doing business.