Illinois State Board of Investment, Chicago, hired Credit Suisse to provide securities lending services under the $10 billion board’s new risk-reducing policy, said William R. Atwood, executive director.
State Street Bank & Trust was the incumbent.
The board believes Credit Suisse is better suited to follow its new policy by seeking incremental income through only the intrinsic value of the securities on loan, rather than seeking to drive income by taking cash as collateral and reinvesting it in a higher-returning strategy, Mr. Atwood said.
The board will now take Treasury securities only as collateral.
The board, which received $11 million in securities lending revenue under its previous policy in the fiscal year ended June 30, projects to get $4 million in the current fiscal year under the new policy.
ISBI, while it hasn’t realized any securities lending losses, reported $14 million in unrealized losses in the last fiscal year and $74 million in the previous fiscal year. It expects none in the current fiscal year.
The Credit Suisse hiring was a result of an RFP the board issued earlier this year for master custodian and securities lending services, seeking both joint and separate bids to give the board flexibility to split up the hiring. State Street, also the incumbent custodian, was rehired for those duties in June.
The board initiated the RFP for fiduciary governance reasons to shop the market for the services because it has been five years since it hired State Street.
ISBI oversees the assets of the approximately $9.5 billion Illinois State Employees’ Retirement System, the $500 million Illinois Judges’ Retirement System and $100 million Illinois General Assembly Retirement System, all in Springfield.