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US pension funds form trading alliance

Four US pension funds have partnered to form the Global Peer Financing Association (GPFA), in a bid to increase and encourage peer-to-peer trading activity in the securities lending and repo markets to benefit asset owners.

California Public Employees' Retirement System (CalPERS), Healthcare of Ontario Pension Plan (HOOPP), Ohio Public Employees Retirement System (OPERS), and State of Wisconsin Investment Board (SWIB) along with eSecLending, Osler, Hoskin & Harcourt LLP and Credit Benchmark, have partnered to form the association.

The GPFA will bring together beneficial owner members to promote the development of more efficient, effective and inexpensive marketplace for peer securities financing activities, liquidity management and collateral management.

CalPERS investment manager Dan Kiefer said an increase in peer-to-peer securities trading would supplement traditional banking trade opportunities for pension funds.

"Over time, we came together as a group of like-minded peers and recognised that there was a need for more information and support related to securities lending and repo activities," he said.

"By transacting with our peers, we have been able to increase revenue generated from our securities lending and repo activities while also expanding sources of liquidity for our plan."

SWIB managing analyst Christopher Benish said there were several benefits to peer transactions.

"We are diversifying our counterparts and including these highly credit worthy entities while also benefiting from lower costs, increased transparency on the trades and greater information sharing amongst the group," he said.

"We also like the predictability of demand where balances are more stable than with traditional banking counterparts over month-ends and quarter-ends."

OPERS senior portfolio manager Jerry May said the association is focused on educating owners about credit approval solutions for non-rated counterparties to allow peers to trade with each other efficiently.

"We recognise each beneficial owner has different factors to consider when evaluating alternative counterparties," he said.

"GPFA has developed a framework of resources to help other peers understand and navigate the approval process as well as the ongoing administration of trades for those that do not have internal resources to support securities lending or repo activity directly."

HOOPP assistant vice president of collateral management, derivatives and fixed income Rob Goobie said the four pension funds were excited at the opportunity to participate in GPFA.

"We believe it is important to promote the interest of members in making the financing market more efficient and effective," he said.

"We see GPFA as a central connection point to foster collaboration and information sharing within the buy-side community."

The GPFA is expanding its membership to other global pension funds, large asset managers, insurance companies, and other asset owners who share an interest in peer-to-peer securities lending or repo.

"There is already global appeal to grow the group of active peer trading participants and GPFA welcomes all beneficial owners that may have an interest in learning more," it said.

Read more: GPFAPension fundsGlobal Peer Financing Association
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