They call him Mr Fantastic;
International Securities Finance. London: Sep 2004. pg. 1
International Securities Finance. London: Sep 2004. pg. 1
Abstract (Summary)
In an interview, Fred Francis, vice president of RBC's securities finance and global products division, talks to fellow Canadian Craig MacDonald about his affection for Toronto, his passion for sailing, and how he got his nickname. When asked, what RBC hopes to gain from the recent launch of the electronic proxy voting service with ADP, Francis responds that because of the number of high profile bankruptcies and incorrect accounting cases they have seen recently, the demand for good governance is on the rise. Institutions realise they have to be more active in understanding the events taking place within their individual stock investments. This oversight and governance need has usually been exhibited through an increased interest in voting, and therefore it has been incumbent upon us to make voting more accessible for institutions.
Fred Francis, vice president of RBC's securities finance and global products division, talks to fellow Canadian Craig MacDonald about his affection for Toronto, his passion for sailing, and how he got his nickname.
Fred Francis is a 24-year veteran of RBC Global Services, as well as a tub-thumper for the Canadian market and securities lending as a whole. Here he talks about the bank's recent launch of an electronic proxy voting service with ADP, and his hopes and frustrations within the business.
ISF: The Canadian securities lending industry often gets labelled as small and conservative. Is that fair, do you think? FF: The Canadian securities lending industry is conservative but it is not small. It may not be the same size as the US, but in terms of the size of the Canadian economy, the penetration is huge. Canada is the fifth largest securities lending market in the world. We started our programme back in 1983. The discipline is no longer a hard sell.
ISF:Why conservative? FF: I say conservative in relation to risk. The benefits of lending can be achieved without adopting a cash collateral and a cash reinvestment strategy, for example. From inception, our programme has been established as a bonds borrowed programme. As a physical collateral programme, it eliminated about 85% of the risk inherent in the lending programme.
ISF: Have you seen many new lenders enter the Canadian market recently? FF: When we lobbied the regulators to change the rules to allow mutual funds to lend in Canada, that represented approximately US$500 billion of new assets coming on stream. Our initial thought was that there would be a period where the uptake meant an overbalance of supply, but it lasted all of six months. But there are new lenders entering the market all the time.
ISF: What does RBC hope to gain from the recent launch of the electronic proxy voting service with ADP? FF: Because of the number of high profile bankruptcies and incorrect accounting cases we have seen recently, the demand for good governance is on the rise. Institutions realise they have to be more active in understanding the events taking place within their individual stock investments. This oversight and governance need has usually been exhibited through an increased interest in voting, and therefore it has been incumbent upon us to make voting more accessible for institutions. It ties back to transparency. There was a time when large pension funds would invest in any number of holdings without having much interest in what was going on in any of them, but things have changed.
ISF: What is the most important thing you have learned in your career to date? FF: To have fun. You have to experiment and get enjoyment from your job. Use fun to have an impact. This philosophy should apply to every part of your life.
ISF: What was your childhood dream? FF: To become a fighter pilot. I realised later it was a bit of a self-centred profession.
ISF: Who is your hero, mentor or someone you admire in the business? FF: This person is not in the business but he is someone I truly admire. His name is Ed Mirvish. He came over to Canada from Eastern Europe many years ago, poor and with a dream. He became a very successful retail owner and operator and has devoted much of his time to promoting culture in Canada.
ISF: Apart from Canada, in what other country in the world could you see yourself living? FF: None, I love Canada!
ISF: What is the best restaurant in Toronto? FF: There is a good one that recently opened up called Bymark. Great food, not too pricey and very close to us, which is convenient. But there are so many good restaurants in Toronto.
ISF: Do you have a nickname at work? FF: Mr Fantastic. Every time one of my team asks me how I am I say fantastic. And the word has just attached itself to me.
ISF: What are you most proud of in your career? FF: One thing that I am especially proud of is RBC's footprint in Europe. We have gone from being unknown to being very well-known and respected over the last seven years.
ISF: How do you balance work and family? FF: I find it better not to balance but to combine the two. My marriage would be a great example. I met my wife at the ISLA/RMA conference in Dublin. She was working on the lending side of the Shell pension fund.
ISF: How do you relax away from the office? FF: I enjoy gardening and sailing, and I have a 33-foot boat. It is great sailing around Lake Ontario, exploring the different bays and undiscovered coves. I also do some charity work, and recently helped raise some money for Easter Seals, which supports handicapped children. This sort of work is so important, because it really makes you put things in perspective.
ISF: Can you give us a betting tip? FF: The only betting tip I can give is to watch the real estate market globally. In Toronto it is heaving and of course everyone knows about the situation in London.
ISF: What really makes you angry? FF: Two things make me angry. The first is grandstanding in the industry by agent lenders. And the second is how some broker/dealers try to throw their weight around.
ISF: What is the biggest challenge the securities financing industry faces in the coming years? FF: The biggest challenge we will encounter is rising interest rates. We have seen low levels for the past few years and a sudden rise in interest rates could create some difficulty for some of our colleagues to the south. What I hope will not happen is a recurrence of 1994. That was when several big players had some very large publicised cash reinvestment losses that varied from US$35 million to upwards of $200 million. And when these get publicised it not only damages the participants, it damages the industry. I remember being at home on a Saturday and an announcement came out that I had not read, and the president of RBC called me at home and asked if this could happen to us.
ISF: What is the biggest fallacy you have heard about the securities lending industry? FF: Securities lending is probably one of the most misunderstood financial products on the market. It is constantly vilified. There are many fallacies surrounding it - one is that lending is a high-risk activity. The reality is that it's as low or high risk as you want it to be, depending on the structure of the programme. Here is a great anomaly in the business - there are more consultants than practitioners. There are a lot of people who talk about understanding the dynamics in this market, understanding the product, and who at some point may have been associated with a programme and unfortunately have not been able to leave the industry. So instead they put up a sign, called Consultant ABC.
Fred Francis, vice president of RBC's securities finance and global products division, talks to fellow Canadian Craig MacDonald about his affection for Toronto, his passion for sailing, and how he got his nickname.
Fred Francis is a 24-year veteran of RBC Global Services, as well as a tub-thumper for the Canadian market and securities lending as a whole. Here he talks about the bank's recent launch of an electronic proxy voting service with ADP, and his hopes and frustrations within the business.
ISF: The Canadian securities lending industry often gets labelled as small and conservative. Is that fair, do you think? FF: The Canadian securities lending industry is conservative but it is not small. It may not be the same size as the US, but in terms of the size of the Canadian economy, the penetration is huge. Canada is the fifth largest securities lending market in the world. We started our programme back in 1983. The discipline is no longer a hard sell.
ISF:Why conservative? FF: I say conservative in relation to risk. The benefits of lending can be achieved without adopting a cash collateral and a cash reinvestment strategy, for example. From inception, our programme has been established as a bonds borrowed programme. As a physical collateral programme, it eliminated about 85% of the risk inherent in the lending programme.
ISF: Have you seen many new lenders enter the Canadian market recently? FF: When we lobbied the regulators to change the rules to allow mutual funds to lend in Canada, that represented approximately US$500 billion of new assets coming on stream. Our initial thought was that there would be a period where the uptake meant an overbalance of supply, but it lasted all of six months. But there are new lenders entering the market all the time.
ISF: What does RBC hope to gain from the recent launch of the electronic proxy voting service with ADP? FF: Because of the number of high profile bankruptcies and incorrect accounting cases we have seen recently, the demand for good governance is on the rise. Institutions realise they have to be more active in understanding the events taking place within their individual stock investments. This oversight and governance need has usually been exhibited through an increased interest in voting, and therefore it has been incumbent upon us to make voting more accessible for institutions. It ties back to transparency. There was a time when large pension funds would invest in any number of holdings without having much interest in what was going on in any of them, but things have changed.
ISF: What is the most important thing you have learned in your career to date? FF: To have fun. You have to experiment and get enjoyment from your job. Use fun to have an impact. This philosophy should apply to every part of your life.
ISF: What was your childhood dream? FF: To become a fighter pilot. I realised later it was a bit of a self-centred profession.
ISF: Who is your hero, mentor or someone you admire in the business? FF: This person is not in the business but he is someone I truly admire. His name is Ed Mirvish. He came over to Canada from Eastern Europe many years ago, poor and with a dream. He became a very successful retail owner and operator and has devoted much of his time to promoting culture in Canada.
ISF: Apart from Canada, in what other country in the world could you see yourself living? FF: None, I love Canada!
ISF: What is the best restaurant in Toronto? FF: There is a good one that recently opened up called Bymark. Great food, not too pricey and very close to us, which is convenient. But there are so many good restaurants in Toronto.
ISF: Do you have a nickname at work? FF: Mr Fantastic. Every time one of my team asks me how I am I say fantastic. And the word has just attached itself to me.
ISF: What are you most proud of in your career? FF: One thing that I am especially proud of is RBC's footprint in Europe. We have gone from being unknown to being very well-known and respected over the last seven years.
ISF: How do you balance work and family? FF: I find it better not to balance but to combine the two. My marriage would be a great example. I met my wife at the ISLA/RMA conference in Dublin. She was working on the lending side of the Shell pension fund.
ISF: How do you relax away from the office? FF: I enjoy gardening and sailing, and I have a 33-foot boat. It is great sailing around Lake Ontario, exploring the different bays and undiscovered coves. I also do some charity work, and recently helped raise some money for Easter Seals, which supports handicapped children. This sort of work is so important, because it really makes you put things in perspective.
ISF: Can you give us a betting tip? FF: The only betting tip I can give is to watch the real estate market globally. In Toronto it is heaving and of course everyone knows about the situation in London.
ISF: What really makes you angry? FF: Two things make me angry. The first is grandstanding in the industry by agent lenders. And the second is how some broker/dealers try to throw their weight around.
ISF: What is the biggest challenge the securities financing industry faces in the coming years? FF: The biggest challenge we will encounter is rising interest rates. We have seen low levels for the past few years and a sudden rise in interest rates could create some difficulty for some of our colleagues to the south. What I hope will not happen is a recurrence of 1994. That was when several big players had some very large publicised cash reinvestment losses that varied from US$35 million to upwards of $200 million. And when these get publicised it not only damages the participants, it damages the industry. I remember being at home on a Saturday and an announcement came out that I had not read, and the president of RBC called me at home and asked if this could happen to us.
ISF: What is the biggest fallacy you have heard about the securities lending industry? FF: Securities lending is probably one of the most misunderstood financial products on the market. It is constantly vilified. There are many fallacies surrounding it - one is that lending is a high-risk activity. The reality is that it's as low or high risk as you want it to be, depending on the structure of the programme. Here is a great anomaly in the business - there are more consultants than practitioners. There are a lot of people who talk about understanding the dynamics in this market, understanding the product, and who at some point may have been associated with a programme and unfortunately have not been able to leave the industry. So instead they put up a sign, called Consultant ABC.
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