The Texas Municipal Retirement System has reappointed State Street as its custodian but has unbundled securities lending from the mandate, appointing Deutsche Bank as its securities lending agent.
Bill Wallace, spokesperson for TMRS, confirmed the decision Tuesday, saying the search for custody and securities lending providers was part of a strategic plan initiative scheduled for this year. The mandates are subject to contract negotiations, Wallace says.
Our investment consultant recommended that the TMRS board consider unbundling custody and securities lending to increase transparency of custodial fees and to allow us to better manage the risks as well as evaluate the performance of the securities lending program, Wallace says.
Proponents and opponents of unbundling have been making their case recently as securities lending which has grown to be a $1.8 trillion industry is seen as more of a front-office activity and the inherent risks become more apparent. For more, see “The Evolution of Securities Lending: From Complacency to Unease?“
(CG)