Fidelity Investments
Justin Aldridge
22 July 2025
Rising RFP activity and provider consolidation are forcing institutional investors to reassess their securities lending partnerships. Justin Aldridge, head of agency lending at Fidelity Investments, discusses the key factors driving selection decisions and why backward-looking performance analysis trumps forward estimates
Image: Justin Aldridge
What is driving the current wave of agent lender evaluations?
We are certainly seeing a wave of evaluations largely driven by consolidation in the agent lending space. Several factors are at play: margin pressures continue to persist, the scale of technology investment required to stay competitive, and broader strategic shifts as firms double down on core businesses.
Some providers are also making material changes to key programme elements, such as indemnification terms or fee structures, to ultimately try and protect their margins. That is forcing institutions to reassess whether their current partner is still the right fit, which is a mission critical part to the relationship.
How should institutional investors approach the selection process differently given these market dynamics?
It is more important than ever today to have a vetting process that is both rigorous and efficient. We often hear from institutions that switched providers based on forward-looking request for proposal (RFP) projections, only to be disappointed when actual results did not align. The reality is forward estimates can be overly optimistic or based on assumptions that do not hold up in practice.
Instead, we encourage a more grounded approach: use historical performance data across multiple holding periods to evaluate providers. This allows for a true 鈥榓pples-to-apples鈥� comparison 鈥� same time frame, similar portfolios, real outcomes. It is a more reliable way to benchmark performance and ensure alignment with your programme鈥檚 goals.
What are the most critical questions institutions should ask potential providers?
First, start by asking whether securities lending is truly a core focus for the firm. That means gauging their financial health, long-term commitment to the business, and whether they have the financial and regulatory infrastructure to scale effectively.
Customisation is another line of questioning, especially where the gap between promise and delivery can be significant. Many providers say they offer tailored programmes, but in practice, customisation often happens manually, leading to exceptions, delays, and frustration. What you want is a provider with the technology to deliver granular customisation at scale, seamlessly and automatically. That is where real differentiation happens.
How important is technology in the selection process?
It is paramount. It is not just about operational efficiency, it is about visibility, control, and the ability to make informed decisions. The right provider should offer technological tools that give you real-time transparency into your programme, support governance needs like proxy voting, and enable detailed performance analysis. If technology is not core to the provider鈥檚 offering, it is worth asking how they plan to keep pace with your evolving requirements.
What role does indemnification play in the evaluation?
Indemnification protects your firm in the event of a borrower default, so it is essential to understand exactly what is covered and what liability you may be assuming. Key questions to ask include: who are the approved counterparties? How are they vetted and monitored? Have there been any defaults, and if so, did the agent use its own capital to make clients whole? Furthermore, it is not enough to offer protection on paper, but understanding the capital adequacy of the agent in the event a default does occur.
What is your advice for institutions looking to optimise their lending programmes?
Evaluate your lending programme every three to five years to ensure your goals remain aligned with your provider's capabilities. The fiduciary responsibility requires selecting a programme that meets your needs and helps optimise performance for investors while maximising operational efficiency. Do not simply focus on estimates 鈥� look at the big picture and ensure the provider has all the right components for a successful partnership.
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