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Securities Lending Returns to MSCI Equity Indices

14 May 2020 Sam Pierson
  • Global equity returns to lendable assets
  • MSCI equity index weighting
  • IHS Markit Securities Finance utilization and lending fee

Global equity utilization increased sharply in March, however as noted in our Q1 revenue snapshot, that uplift came off the lowest level of utilization on record observed on January 13th, 2020. The hope that higher utilization would persist and drive greater returns to equity lendable assets was met with some resistance, with utilization declining throughout April such that the average utilization for the month was a minor decline YoY. The average global equity fee spread declined YoY for April, resulting 2.78bps return to lendable for all global equities, a -14.4% YoY decline. To add a common understanding of those returns we've broken out by the industry standard MSCI equity indices, with highlights below.

  1. The MSCI World Index returned 1.3bps to 2.3bps over the 12m ending April 2020, with US contributing 29% of the total revenue.
  2. The MSCI World April return to lendable failed to improve on the March results, the YTD monthly peak, however the April return was greater than January or February.
  3. Similar to MSCI World, the MSCI USA index return to lendable declined relative to March, however remained elevated compared with January and February, with 0.5bps to 0.8bps return to lendable in April.
  4. The MSCI Emerging Markets Index produced the highest securities lending return in April with a range of 5.2 bps to 10.2 bps, more than 78% contributed by special stocks, however EM returns have declined YoY.
  5. All six indices showed a lower level of securities lending return for Q1 2020 compared to Q1 2019, however MSCI USA & MSCI Japan both had a YoY increase in April return to lendable.
  6. Media & Entertainment was the top performing sector in the MSCI World index for April 2020, contributing 14% of securities lending revenue. It was also the top performing sector in MSCI USA where it contributed around 45% of the securities lending revenue for the month.
  7. Short term peaks in returns for the MSCI World and MSCI USA indices relate to exchange offers, which generate significant revenues for shareholders who agree to forgo the offer to lend shares.

The April reports for each index are available via links below. Historical reports along with other reference materials for the IHS Markit Securities Finance product available here.

MSCI World

MSCI USA

MSCI Europe

MSCI Emerging Markets

MSCI Japan

MSCI APAC ex-Japan

Posted 14 May 2020 by Sam Pierson, Director, Securities Finance, IHS Markit

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