Analysis of Securities Lending Performance Metrics

This technical report examines the performance of securities lending programs over a 15-year period, from 2008 to 2023, utilizing data from over 5,000 anonymized programs. The analysis focuses on quantifying historical returns and losses to compute various risk-adjusted performance metrics, including the Sharpe and Sortino ratios. Findings indicate that the risk-adjusted performance of securities lending significantly surpasses that of benchmark stock and bond indices, particularly during market downturns. The report also highlights the diversification benefits of securities lending, noting its low or negative correlation with traditional asset classes, which enhances portfolio efficiency during risk-off periods. Additionally, the report discusses the implications of monetary policy on reinvestment spreads and assesses the probability of adverse events in securities lending scenarios. This comprehensive analysis provides institutional investors with empirical data to inform their decisions regarding engagement in securities lending as a strategy for generating incremental returns while managing risk.