Q1 2020 Sector Analysis and an Early Look at the Impact of COVID-19

Q1 2020 Sector Analysis and an Early Look at the Impact of COVID-19

Q1 2020 Sector Analysis and an Early Look at the Impact of COVID-19

By Matt Ross and Keith Min

May 2020

The first quarter of 2020 brought forth many of the emotions and concerns around market volatility and economic stability that have not been seen on a wide scale since 2008. While the market values for many sectors have already seen drastic decreases and the economic impact of COVID-19 is only getting started, one might think that the market environment may have created  shorting opportunities resulting in increased revenue.  

However, Q1 2020 generated less revenue from securities lending than Q1 2019 as demand lessened during uncertain times, and revenue was still driven by a handful of specials and corporate events. That said, a few trends have taken shape since the global equity markets were at an all-time high in mid-February. DataLend reviewed some highlights from Q1 at a sector level as well as some notable trends in the COVID-19 environment. 

Q1 2020 Sector Revenue

The Consumer Discretionary sector has had its fair share of high-profile top revenue-generating securities over the past three years with Tesla, JC Penney and Luckin Coffee, to name a few. For Q1 2020, interactive fitness product maker Peloton drove the sector’s revenue prior to its lock-up expiry period ending. The merger of two food delivery services, Takeaway.com and Just Eats, also provided additional revenue in the sector but still only resulted in a 1.4% increase year over year across the sector.

Corporate events, like the exchange offer from McKesson in February 2020, tend to make the largest impact in securities lending revenue despite their short on-loan duration. While the revenue generated from the McKesson and Change Healthcare exchange offer was substantial, $36 million, the Healthcare sector saw a 19.8% decline in revenue from the prior year as average fees dropped by 14% while average loan balances fell by 8%.

Real estate edged higher with a massive 36% increase in revenue from Q1 2019 to Q1 2020. Tanger Factory Outlets was a top 10 earner in Q1 with just under $20 million in revenue generated as fee and loan values peaked in late January.

Impact of COVID-19

Comparing the timelines before and during the global COVID-19 pandemic (January 1 to February 21, 2020, and February 22 to April 17, 2020, respectively), we begin to see the impact in the harder-hit sectors. With travel restrictions and quarantining guidelines actively limiting travel, Industrials, specifically the Transportation industry, has seen a utilization increase from 6.8% to 9.3% as well as an average fee increase from 32 bps to 54 bps.


The Energy sector had its share of volatility pre-COVID as oil-field services company, McDermott, declared bankruptcy and OPEC and Russia disputed the necessity of production cuts resulting in a substantial decrease in the price of oil. Mid-COVID volatility remains high with oil futures plummeting with limited storage available for immediate delivery. Oil and Gas Exploration and Production companies saw an increase in utilization from 10% to 12% with the average fee increasing drastically from 56 bps to 136 bps. While the Energy sector is still lagging compared to its Q1 2019 performance, volatility in oil futures continues to this day.

Oil & Gas Exploration and Production

With market conditions changing day-to-day and the long-term economic impact of COVID-19 as uncertain as ever, the long-term impact to the securities lending market remains to be seen. The importance of high-profile specials driving revenue in 2020 is just as evident as it was in 2018 and 2019. However, as illustrated, certain areas have felt the impact of COVID-19 more than others. While this may change in the coming weeks or months, DataLend will be here to keep you updated.

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DataLend—the securities finance market data division of EquiLend, a FINRA-regulated financial services firm—provides aggregated, anonymized, cleansed and standardized securities finance data covering all asset classes, regions and markets globally. DataLend operates on a “give-to-get” model, processing more than 3 million global transactions per day. DataLend’s data set covers more than 51,000 securities on loan with a daily on-loan balance of $2.1+ trillion and lendable balance of $22 trillion (as of January 2020).

Matt Ross
Associate Director
Product Specialist
+1 212 901 2299

Keith Min
Vice President
Product Specialist
+1 646 767 4327