The money manager is bringing its stock-lending business in-house, according to a March 29 regulatory filing, instead of paying Goldman Sachs to run it. According to filings, the bank received about 10% of the revenues generated by Fidelity's lending, primarily to firms that borrow stocks to bet against them.
Fidelity, which managed $2.7 trillion of assets in March, plans to use some of the savings from the switch to boost returns in the funds that lend securities, particularly index trackers that hold thousands of different stocks. The move comes as Fidelity and its rivals compete to cut fees on index funds, luring assets that can be used for more profitable businesses like securities lending, industry analysts say.
"The lower fees go, the more important securities lending revenue becomes," said Stephen Biggar, an Argus Research analyst who tracks financial services companies.
Securities finance is a big business, producing more than $9.9 billion of revenue globally for lenders last year, according to EquiLend, a securities-finance trading and clearing service owned by global financial firms.