Who owns the supply?
27 October 2026
As retail investors, ETF providers, private banks, and technology platforms contribute increasing volumes of inventory, industry experts explore how new asset pools are forcing beneficial owners to rethink how they lend securities, engage with agents, and generate value in an increasingly competitive market. Theodore Law reports
Image: stock.adobe.com/zef art
For decades, the securities lending ecosystem rested on a familiar foundation. Pension funds, sovereign wealth funds, insurers, endowments, and large asset managers supplied the bulk of lendable inventory, while agent lenders and broker-dealers connected that supply with borrowers seeking liquidity.
The growth of retail lending programmes, exchange traded fund (ETF) assets, fully paid lending arrangements, and digital distribution channels has introduced significant new sources of inventory into the market. At the same time, technology has lowered barriers to participation, allowing a broader range of firms and investors to engage with securities lending than ever before.
The result is a market in transition. Both supply and competition are increasing, forcing beneficial owners to rethink long-held assumptions about programme design, agent relationships, collateral parameters, and return expectations.
The industry focus has shifted from accessing inventory to how supply is utilised, differentiated, and positioned to meet evolving borrower demand.
This shifting dynamic took centre stage at the recent ISLA Americas Annual Securities 91ԭƬ & Collateral Management Conference during the panel discussion: ‘Who Owns the Supply? The Next Evolution of Securities Lending Markets’.
Drawing on insights shared by the expert panellists, the discussion highlighted how the influx of diverse asset pools is disrupting traditional lending frameworks. Speakers emphasised that to remain competitive, market participants must embrace digital transformation, adopt more flexible collateral guidelines, and leverage advanced data analytics to unlock value from non-traditional supply channels.
The rise of a new supply landscape
One of the clearest structural shifts in the modern market is the growing diversity of lending supply. Driven by the democratisation of finance, retail money has established a permanent foothold in an ecosystem historically reserved for multi-billion dollar institutions.
Matthew Brunette, global head of financing at Norges Bank Investment Management, notes that the market has changed significantly since the pandemic as new sources of inventory have entered lending programmes.
“Pretty much anywhere you go, you can open a retail brokerage account and tick a box that says you want to lend your securities,” he says.
Retail platforms have become important contributors to the ecosystem, while broker-dealers have become more sophisticated in managing internal inventory. The growth of ETF assets has added further depth, particularly within highly liquid large-cap securities. This multi-layered influx means that volume alone is no longer an automatic differentiator.
The structural influx of mass-market assets means that the traditional buy side luxury of passive participation is becoming unviable. Brunette suggests that the days when beneficial owners could simply make inventory available and expect borrowers to seek them out are largely over.
“If you just kind of show up and say, 'Here's my portfolio, please borrow it,' I think you're going to struggle a little bit,” he comments. Instead, beneficial owners need to understand where demand is coming from, and why.
To capture yield, lenders must pay closer attention to shifting borrow drivers. Historically tied to short selling activity, demand has broadened considerably as borrowers require financing solutions tied to wider balance sheet, funding, and liquidity objectives.
“It's coming from hedge funds that want to short, but hedge funds also want to fund their long positions as well,” Brunette says. This shift encourages lenders to view portfolios as multi-purpose liquidity reservoirs to support diverse funding requirements.
The supply overhang debate
This rapid expansion of market participation has sparked an essential debate regarding whether the marketplace suffers from a supply overhang. The ongoing monetisation of retail and wealth asset channels has altered the baseline supply-and-demand equilibrium.
Increased participation from retail programmes, alternative lenders, and new market entrants has expanded the supply base and intensified competition.
Combined with advances in trading technology and inventory discovery, this has placed pressure on lending fees, particularly within highly liquid securities. As a result, lenders are increasingly focused on differentiation and utilisation rather than supply alone.
The pricing pressure is heavily linked to structural fragmentation, as hundreds of smaller firms now actively compete with the historically dominant major agent lenders.
Technology has accelerated this trend via smart routing, automated matching tools, and advanced discovery engines. This has optimised borrower access while eroding lending fee margins, shifting pricing power firmly to the borrow side.
Industry participants acknowledge that increasing competition and fee compression are changing the economics of securities lending, particularly within highly liquid asset classes where supply has expanded significantly over recent years. As more inventory enters the market through retail programmes, smaller intermediaries and alternative lending channels, lenders are finding it increasingly difficult to differentiate themselves on supply alone.
At the same time, significant growth opportunities remain outside traditional institutional markets. Family offices, private wealth clients, and smaller broker-dealers collectively represent substantial pools of assets that remain underrepresented in securities lending programmes. Improving awareness, education, and operational accessibility among these groups could unlock new sources of inventory and support future market expansion.
Finding value beyond general collateral
Despite these challenges, opportunities remain available for lenders willing to target asset classes and geographies protected by higher operational barriers to entry.
Daniel Weidman, portfolio manager and vice president at Dimensional Fund Advisors, argues that beneficial owners need to look beyond the most heavily supplied areas of the market.
“There's been growth in supply, especially in the US large-cap space, but there is tremendous value when you start moving from the large cap to the ex-US, and then even to the smaller micro caps and less liquid names,” he says. “The supply there hasn't quite hit the levels it has for the S&P 500.”
Dimensional's diversified inventory includes exposure across global markets, allowing the firm to benefit from demand in less crowded segments. “Where we continue to see a lot of value is ex-US markets,” Weidman notes.
“APAC has had a spectacular year for lending returns. Some of those markets tend to be a bit more operationally intensive, and require close agent coordination,” he continues.
When executed dynamically, these non-benchmark allocations deliver outsized programmatic benefits. “Our emerging markets core two funds over the past trailing year made around 25 basis points, which helps offset about 64 per cent of our net expense ratio,” Weidman shares.
"On the most extreme end, our emerging market small cap fund has brought in around 60 basis points over the past year, and that's been around a 100 per cent offset of our net expense ratio."
The rise of the active beneficial owner
Maximising value in this climate requires asset owners to discard the traditional ‘set-it-and-forget-it’ framework in favour of active oversight, managing their financing books with the same rigour applied to primary portfolios.
“We don't view lending as a set-it-and-forget-it process with our agents,” Weidman explains. “We continuously review our parameters and our governance with our investment committee and risk team. If you're overly constrained in your programme, you're artificially capping the returns that you could be making from the market.”
Adapting and evolving requires structural agility, specifically around collateral flexibility. Accepting a wider mix of cash and non-cash collateral, alongside different borrowing structures, directly enhances a lender's market attractiveness.
This desire for control is driving a notable trend among asset owners to explore internalising elements of their operations. However, the sheer technical burden of managing multi-jurisdictional settlements means that third-party infrastructure remains indispensable. Brunette points out that very few peers completely bypass third-party infrastructure.
“People want to take more control, but very few have gone all in and wanted to lend a global portfolio because they found out that's quite complicated,” he observes.
“They still depend on their agents to provide the infrastructure to support that. They don't really want to do the hard work of securities lending, of asset servicing, of settlements, and reconciliations.”
Instead, the focus is shifting toward self-directed execution. The target is a co-sourced model where the lender retains granular governance without absorbing heavy back office overheads.
“They want to control their inventory, the amount of cash they're raising, and where trades are going. I think that's the direction of travel,” Brunette adds.
A changing relationship with agents
As beneficial owners become more engaged, the role of the agent lender is turning into a strategic partnership.
Weidman confirms that Dimensional prioritises a multi-agent model because building out global, in-house infrastructure is an immense undertaking. “The agent model is set up to be scalable, so it benefits a wide variety of clients,” he says.
However, client expectations are shifting toward bespoke service, particularly around automated flexibility that directly aligns with specialised tax strategies.
“What we would like to see from agents over time is for them to continue to be more customisable to meet our goals around parameters like tax efficiency, which is huge for our investors, especially in our ETFs,” Weidman notes.
Ultimately, the technical and regulatory burden of global trading justifies the cost of outsourcing. In an era of intense regulatory scrutiny, the risk-mitigation and due diligence role of the agent provides measurable structural value.
“Your agent lender isn't just trading your securities, they are doing a lot of due diligence on your behalf on counterparties, markets, and collateral,” Brunette concludes. “Most pension funds are not set up to go around all these markets and figure those things out for themselves.”
This oversight is critical as borrowers become increasingly discerning and picky with who they deal with, highlighting how the credit landscape has grown highly nuanced.
This selectivity has encouraged deeper dialogue between borrowers, agent lenders, and beneficial owners to ensure inventory is optimally structured. As supply sources continue to diversify, the traditional boundaries of the market are blurring.
Success for asset owners is no longer determined by the size of their lendable portfolio, but by their structural agility, operational efficiency, and willingness to establish bespoke, transparent partnerships with their agents.
The growth of retail lending programmes, exchange traded fund (ETF) assets, fully paid lending arrangements, and digital distribution channels has introduced significant new sources of inventory into the market. At the same time, technology has lowered barriers to participation, allowing a broader range of firms and investors to engage with securities lending than ever before.
The result is a market in transition. Both supply and competition are increasing, forcing beneficial owners to rethink long-held assumptions about programme design, agent relationships, collateral parameters, and return expectations.
The industry focus has shifted from accessing inventory to how supply is utilised, differentiated, and positioned to meet evolving borrower demand.
This shifting dynamic took centre stage at the recent ISLA Americas Annual Securities 91ԭƬ & Collateral Management Conference during the panel discussion: ‘Who Owns the Supply? The Next Evolution of Securities Lending Markets’.
Drawing on insights shared by the expert panellists, the discussion highlighted how the influx of diverse asset pools is disrupting traditional lending frameworks. Speakers emphasised that to remain competitive, market participants must embrace digital transformation, adopt more flexible collateral guidelines, and leverage advanced data analytics to unlock value from non-traditional supply channels.
The rise of a new supply landscape
One of the clearest structural shifts in the modern market is the growing diversity of lending supply. Driven by the democratisation of finance, retail money has established a permanent foothold in an ecosystem historically reserved for multi-billion dollar institutions.
Matthew Brunette, global head of financing at Norges Bank Investment Management, notes that the market has changed significantly since the pandemic as new sources of inventory have entered lending programmes.
“Pretty much anywhere you go, you can open a retail brokerage account and tick a box that says you want to lend your securities,” he says.
Retail platforms have become important contributors to the ecosystem, while broker-dealers have become more sophisticated in managing internal inventory. The growth of ETF assets has added further depth, particularly within highly liquid large-cap securities. This multi-layered influx means that volume alone is no longer an automatic differentiator.
The structural influx of mass-market assets means that the traditional buy side luxury of passive participation is becoming unviable. Brunette suggests that the days when beneficial owners could simply make inventory available and expect borrowers to seek them out are largely over.
“If you just kind of show up and say, 'Here's my portfolio, please borrow it,' I think you're going to struggle a little bit,” he comments. Instead, beneficial owners need to understand where demand is coming from, and why.
To capture yield, lenders must pay closer attention to shifting borrow drivers. Historically tied to short selling activity, demand has broadened considerably as borrowers require financing solutions tied to wider balance sheet, funding, and liquidity objectives.
“It's coming from hedge funds that want to short, but hedge funds also want to fund their long positions as well,” Brunette says. This shift encourages lenders to view portfolios as multi-purpose liquidity reservoirs to support diverse funding requirements.
The supply overhang debate
This rapid expansion of market participation has sparked an essential debate regarding whether the marketplace suffers from a supply overhang. The ongoing monetisation of retail and wealth asset channels has altered the baseline supply-and-demand equilibrium.
Increased participation from retail programmes, alternative lenders, and new market entrants has expanded the supply base and intensified competition.
Combined with advances in trading technology and inventory discovery, this has placed pressure on lending fees, particularly within highly liquid securities. As a result, lenders are increasingly focused on differentiation and utilisation rather than supply alone.
The pricing pressure is heavily linked to structural fragmentation, as hundreds of smaller firms now actively compete with the historically dominant major agent lenders.
Technology has accelerated this trend via smart routing, automated matching tools, and advanced discovery engines. This has optimised borrower access while eroding lending fee margins, shifting pricing power firmly to the borrow side.
Industry participants acknowledge that increasing competition and fee compression are changing the economics of securities lending, particularly within highly liquid asset classes where supply has expanded significantly over recent years. As more inventory enters the market through retail programmes, smaller intermediaries and alternative lending channels, lenders are finding it increasingly difficult to differentiate themselves on supply alone.
At the same time, significant growth opportunities remain outside traditional institutional markets. Family offices, private wealth clients, and smaller broker-dealers collectively represent substantial pools of assets that remain underrepresented in securities lending programmes. Improving awareness, education, and operational accessibility among these groups could unlock new sources of inventory and support future market expansion.
Finding value beyond general collateral
Despite these challenges, opportunities remain available for lenders willing to target asset classes and geographies protected by higher operational barriers to entry.
Daniel Weidman, portfolio manager and vice president at Dimensional Fund Advisors, argues that beneficial owners need to look beyond the most heavily supplied areas of the market.
“There's been growth in supply, especially in the US large-cap space, but there is tremendous value when you start moving from the large cap to the ex-US, and then even to the smaller micro caps and less liquid names,” he says. “The supply there hasn't quite hit the levels it has for the S&P 500.”
Dimensional's diversified inventory includes exposure across global markets, allowing the firm to benefit from demand in less crowded segments. “Where we continue to see a lot of value is ex-US markets,” Weidman notes.
“APAC has had a spectacular year for lending returns. Some of those markets tend to be a bit more operationally intensive, and require close agent coordination,” he continues.
When executed dynamically, these non-benchmark allocations deliver outsized programmatic benefits. “Our emerging markets core two funds over the past trailing year made around 25 basis points, which helps offset about 64 per cent of our net expense ratio,” Weidman shares.
"On the most extreme end, our emerging market small cap fund has brought in around 60 basis points over the past year, and that's been around a 100 per cent offset of our net expense ratio."
The rise of the active beneficial owner
Maximising value in this climate requires asset owners to discard the traditional ‘set-it-and-forget-it’ framework in favour of active oversight, managing their financing books with the same rigour applied to primary portfolios.
“We don't view lending as a set-it-and-forget-it process with our agents,” Weidman explains. “We continuously review our parameters and our governance with our investment committee and risk team. If you're overly constrained in your programme, you're artificially capping the returns that you could be making from the market.”
Adapting and evolving requires structural agility, specifically around collateral flexibility. Accepting a wider mix of cash and non-cash collateral, alongside different borrowing structures, directly enhances a lender's market attractiveness.
This desire for control is driving a notable trend among asset owners to explore internalising elements of their operations. However, the sheer technical burden of managing multi-jurisdictional settlements means that third-party infrastructure remains indispensable. Brunette points out that very few peers completely bypass third-party infrastructure.
“People want to take more control, but very few have gone all in and wanted to lend a global portfolio because they found out that's quite complicated,” he observes.
“They still depend on their agents to provide the infrastructure to support that. They don't really want to do the hard work of securities lending, of asset servicing, of settlements, and reconciliations.”
Instead, the focus is shifting toward self-directed execution. The target is a co-sourced model where the lender retains granular governance without absorbing heavy back office overheads.
“They want to control their inventory, the amount of cash they're raising, and where trades are going. I think that's the direction of travel,” Brunette adds.
A changing relationship with agents
As beneficial owners become more engaged, the role of the agent lender is turning into a strategic partnership.
Weidman confirms that Dimensional prioritises a multi-agent model because building out global, in-house infrastructure is an immense undertaking. “The agent model is set up to be scalable, so it benefits a wide variety of clients,” he says.
However, client expectations are shifting toward bespoke service, particularly around automated flexibility that directly aligns with specialised tax strategies.
“What we would like to see from agents over time is for them to continue to be more customisable to meet our goals around parameters like tax efficiency, which is huge for our investors, especially in our ETFs,” Weidman notes.
Ultimately, the technical and regulatory burden of global trading justifies the cost of outsourcing. In an era of intense regulatory scrutiny, the risk-mitigation and due diligence role of the agent provides measurable structural value.
“Your agent lender isn't just trading your securities, they are doing a lot of due diligence on your behalf on counterparties, markets, and collateral,” Brunette concludes. “Most pension funds are not set up to go around all these markets and figure those things out for themselves.”
This oversight is critical as borrowers become increasingly discerning and picky with who they deal with, highlighting how the credit landscape has grown highly nuanced.
This selectivity has encouraged deeper dialogue between borrowers, agent lenders, and beneficial owners to ensure inventory is optimally structured. As supply sources continue to diversify, the traditional boundaries of the market are blurring.
Success for asset owners is no longer determined by the size of their lendable portfolio, but by their structural agility, operational efficiency, and willingness to establish bespoke, transparent partnerships with their agents.
NO FEE, NO RISK
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities 91ԭƬ Times
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities 91ԭƬ Times
