Fidelity Takes Lending Into Its Own Hands - Adviser Investments

Fidelity Takes Lending Into Its Own Hands

Fidelity Takes Lending Into Its Own Hands

Never one to be left behind on investing trends, Fidelity recently announced the launch of Fidelity Agency Lending, a platform that the firm’s global equity trading head says “could meaningfully improve the overall returns that we deliver to our fund shareholders.”

The new platform comes after Fidelity canned Goldman Sachs as its manager of security lending in mid-2019 and brought the business in-house. That decision pumped up Fidelity’s revenues by 10%.

Fidelity Agency Lending currently has over $2 trillion in assets to lend to outside asset managers and other investment professionals.

Here’s how this works: Asset managers like Fidelity, Blackrock and Vanguard swap stocks and other securities that they own from their mutual funds and ETFs. With Fidelity Agency Lending, the mutual fund titan can engage AI-fueled loan decisions that customize automated share swaps based on Fidelity’s exclusive risk models.

The product extends Fidelity’s financing arm, which for more than 20 years has offered institutions its Fidelity Prime Services, Fully Paid Lending and PB Optimize via its capital markets group.

Fidelity capitalizes on the revenue accrued by lending out stocks to rival asset managers. According to The Wall Street Journal, the sales from lending a large-cap stock out could pump up a mutual fund’s return by 0.01% to 0.02%—small change, perhaps, but in an investment landscape where management fees are continuing to dwindle, every bit helps.

Loaning out high-demand, less-liquid shares is even more lucrative, garnering 0.25% to 0.30% in additional revenue.

Fidelity’s hardly the only player in the securities-lending space; it’s become more common since the Financial Crisis, with revenues topping $10 billion in 2018. Though low interest rates have eaten into sales more recently, with total revenues of $9.3 billion in 2020.

As the fee wars have heated up in recent years, fund companies are looking wherever they can for a few basis points in performance to keep clients from bolting to less expensive investments. While you may not necessarily notice the contribution these loaned assets add to your mutual fund’s bottom line, the move shows Fidelity is finding creative ways to add value for shareholders.

Sell in May? No Way

With the arrival of spring comes the old saw that investors should “sell in May and go away.”

The theory is that stocks don’t perform as well between May and October as they do during other months, so investors should sell their holdings and park the proceeds in cash for six months to avoid downturns. Then they buy back in November and remain invested through April, when markets have historically tended to do better.

Simple in theory, it is neither sound nor profitable. Consider that, over the past decade, the maneuver only worked once, in 2011, but those who continued to follow the Sell-in-May “strategy” missed out on positive, better-than-cash returns in each of the following nine years.

Note: Table shows returns of Vanguard’s 500 Index and Prime Money Market funds over the past 10 years, covering the period from 5/1 to 10/31 each year (or from the first May trading day through the final October trading day in a given year). Sources: Vanguard, Adviser Investments.

Our motto: “Time in the markets, not market timing.” You simply don’t want to interrupt compounding without a good reason. And selling on the flip of a calendar invented in 1582 seems both unnecessary and arbitrary.

Podcast: Blockbuster Earnings, Monster Recovery?

This has been a record-setting corporate earnings season by any measure, with nearly 90% of companies beating analysts’ expectations—and some outright crushing them. But does this mean we’re headed into an economic boom? This week, portfolio managers Steve Johnson and Charlie Toole discuss the trends behind the earnings headlines, and what they could mean for the second half of the year. Topics include:

  • Why this earnings season is different from those during previous post-recession recoveries
  • Whether consumer spending can support the recovery—and current valuations—going forward
  • Supply-side pressures that could put a check on earnings growth in the second half of the year, including inflation and shortages in crucial inputs like semiconductor chips

Is this earnings season as good as it gets? Or can corporate earnings—and those companies’ stock prices—continue to surge over the rest of 2021? Click to listen now!

Second-Quarter Webinar Replay—Inflation, Inoculation and Infrastructure: Defining the New Normal

In our live, interactive webinar, we shared our views on the markets and the rebounding economy and what we expect for stocks as vaccinations rise and the country reopens.

Chairman Dan Wiener and Director of Research Jeff DeMaso offered their thoughts on the influence of stimulus on the recovery, their inflation expectations amid pandemic-distorted data, the health care sector’s role in markets and portfolios, and the potentially wide-ranging impact of infrastructure spending.

In our Q&A segment, Chief Investment Officer Jim Lowell, Vice President Charlie Toole and Research Analyst Liz Laprade answered viewer questions on a gamut of topics. They addressed the direction of interest rates, whether the stock market is overvalued, inflation’s effect on dividend stocks and muni bonds, and Bitcoin, among other topics.

We’ve just experienced stocks’ best 12-month return in over 60 years—to hear our experts’ answers to your most pressing questions about where we go from here, click here to watch now!

Adviser Investments’ Today’s Market Takeaways

There’s no shortage of hyperbolic headlines and provocative punditry in the financial media. But you won’t find such hysterics here. In Today’s Market Takeaways, members of our investment team provide timely videos that clearly and concisely explain what we’re seeing in the markets.

Research Analyst Liz Laprade talked about the potential broader market impact of the Colonial Pipeline hack, while Vice President Steve Johnson discussed a slump for some previously high-flying tech names.

We hope you find these episodes engaging and accessible, and please let us know if there are any topics you’d like to hear us address by sending an email to!

About Adviser Investments

Adviser Investments is a full service wealth management firm, offering investment management, financial and tax planning, managed individual bond portfolios, and 401(k) advisory services. We’ve been helping individuals, trusts, institutions and foundations since 1994, and have more than 3,500 clients across the country and over $6 billion in assets under management. Our portfolios encompass actively managed funds, ETFs, socially responsible investments and tactical asset allocation strategies, with particular expertise in Fidelity and Vanguard mutual funds. We take pride in being The Adviser You Can Talk To.

Our minimum account size is $350,000.  To see a full list of our awards and recognitions, click here, and for more information, please visit or call 800-492-6868.

Disclaimer: This material is distributed for informational purposes only. The investment ideas and opinions contained herein should not be viewed as recommendations or personal investment advice or considered an offer to buy or sell specific securities. Our statements and opinions are subject to change at any time, without notice and should be considered only as part of a diversified portfolio. Mutual funds and exchange-traded funds mentioned herein are not necessarily held in client portfolios. Data and statistics contained in this report are obtained from what we believe to be reliable sources; however, their accuracy, completeness or reliability cannot be guaranteed.

You may request a free copy of the firm’s Form ADV Part 2A, which describes, among other items, risk factors, strategies, affiliations, services offered and fees charged.

Past performance is not an indication of future returns. Tax, legal and insurance information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice, or as advice on whether to buy or surrender any insurance products. Personalized tax advice and tax return preparation is available through a separate, written engagement agreement with Adviser Investments Tax Solutions. We do not provide legal advice, nor sell insurance products. Always consult a licensed attorney, tax professional, or licensed insurance professional regarding your specific legal or tax situation, or insurance needs.

The Barron’s America’s Best Independent Advisers rankings consider factors such as assets under management, revenue produced for the firm, and quality of practice as determined by Barron’s editors. According to Barron’s, “around 4,000” advisory firms were considered for this recognition in 2020; with about 1,200 firms receiving recognition. The award sponsor has not disclosed how many firms were surveyed or considered for this recognition, nor the percentage of total participants that ultimately received recognition. For more information and a complete list of recipients visit Years Received: 2020, 2019, 2018, 2017, 2016, 2015 & 2014.

The Barron’s Top Advisor Rankings by State (Massachusetts) (also referred to as Barron’s Top 1,200 Financial Advisers) considers factors such as assets under management, revenue produced for the firm, regulatory record, quality of practice and philanthropic work. According to Barron’s, “around 4,000” advisory firms were considered for this award in 2020, with about 1,200 firms receiving recognition. For more information and a complete list of recipients visit Years Received: 2020, 2019, 2018, 2017, 2016, 2015 & 2014.

The Financial Times 300 Top Registered Investment Advisers is an independent listing produced annually by the Financial Times and Ignites Research. According to the Financial Times, in 2019, approximately 2000 firms were invited to be considered for its list; 740 responded, with 300 being named to this list. The listing reflects each practice’s performance in six primary areas: Assets under management (70-75% of a firm’s score), asset growth (15% of a firm’s score), years in existence, compliance record, credentials and online accessibility. For more information and a complete list of recipients visit Received: 2019, 2018, 2016, 2015 & 2014.

Awards referenced above do not consider client experience and are not indicative of such. Nor are awards indicative of future performance. Unless otherwise noted, Adviser Investments does not pay a fee to participate in any of these awards. Additionally, awards typically only consider and recognize participants that choose to participate; and are often based on information supplied by the participants—such information should not be assumed to be verified by the sponsor of the award.

The Adviser You Can Talk To Podcast is a registered trademark of Adviser Investments, LLC.

For a summary of Adviser Investments’ advisory services and fiduciary responsibilities to our clients, please review our Form CRS here.

© 2021 Adviser Investments, LLC. All Rights Reserved.