As market complexity rises and scrutiny of liquidity, alpha, and risk intensifies, buyside firms have made asset pool optimization a front-office priority. Higher volumes, new counterparties, and evolving infrastructure and regulation are complicating portfolio and liquidity management amid uncertain geopolitics and macro conditions.

Recent shocks—from the 2022 LDI crisis and 2023 bank failures to the April 2025 tariff-driven sell-off—show how quickly stress can tighten liquidity and amplify funding pressures. In response, asset owners are expanding collateral management and securities finance beyond cash to mobilize a wider set of assets (e.g. corporate bonds and equities).

This can improve asset utilization, add incremental return, and strengthen dynamic liquidity and risk management, but operational constraints often limit scale. Securities collateral introduces added complexity (settlement, asset servicing, substitutions, derivatives pricing impacts, and balance-sheet considerations), driving upgrades to infrastructure, processes, and counterparty/service-provider models.

As asset pool optimization and intensified liquidity management remain buyside priorities, we explore the key considerations—investment strategy, regulatory drivers, and operational friction—and the solutions to address these pain points.

Top Buyside Considerations

Investment Strategy Game Plan

With public-sector balance sheets strained and funding gaps widening, buyside firms are rethinking how to meet near-term cash needs without compromising long-term returns. For liability-driven investors like pensions and insurers, the objective is a reliable funding path to pay obligations on time, stay resilient, and avoid forced sales.

Strategy is increasingly rooted in liquidity, operational efficiency, and alpha:

• Liquidity: a binding constraint—optimize enterprise cash uses (margin, settlement, benefits, rebalancing) and prioritize dependable access to cash, including pre-positioned funding, over simple asset “sellability.”
• Operational efficiency: fragmentation across venues, counterparties, and regimes creates hidden costs (fails, trapped assets, delays) and forces excess “just-in-case” buffers.
• Alpha: still critical, but judged on the return path (drawdowns, convexity, flexibility). Heavier derivatives use can improve exposure/hedging but increase margin and recurring VM liquidity drain.

An end-to-end collateral platform can differentiate by enabling fast, controlled collateral mobilization and substitution across geographies/counterparties, consolidating pools for margin optimization, and improving transparency on eligibility, concentrations, and haircuts. Securities lending also matters beyond incremental return; integrated with collateral and liquidity management, it monetizes idle inventory and expands funding and collateral optionality.

Regulatory Shifts

The phased implementation of UMR from 2016 through 2022 has been a major catalyst for the buyside’s sharper focus on funding and collateral. By mandating the bilateral OTC exchange of IM and VM, it strengthened counterparty protections and reduced systemic risk.

UMR also imposed a more operationally intensive, capital-heavy regime: IM is segregated and typically non-rehypothecatable, while VM can be called frequently, making forecasting, eligibility management, and settlement discipline daily requirements.

A key outcome is the rapid expansion of bank/custodian collateral segregation, with 1,000+ firms entering new segregation relationships—adding workflows, documentation, and collateral movements. While improving transparency and protection, segregation encumbers more high-quality assets, reducing balance-sheet flexibility and increasing the carry cost of derivatives.

As eligible securities become more central to meeting IM, buyside firms increasingly manage collateral as an enterprise resource to optimize across portfolios, counterparties, and liquidity horizons.

Operational Friction

Institutional investors face growing operational friction in collateral and securities finance as markets, regulation, and margin regimes evolve. Many still rely on execution-heavy, fragmented operating models that slow collateral movement and increase error risk.

Spreadsheet-driven workflows compound this with key-person risk, weaker controls, and recurring breaks—creating avoidable funding friction when intraday margin and settlement windows are tight.

At the same time, securities finance and collateral management are converging: collateral is an enterprise resource, but inventory is siloed across custodians, entities, strategies, and jurisdictions while IM, VM, repo, and securities lending compete for the same assets—limiting dynamic allocation, driving over-posting, and pressuring liquidity buffers.

The answer is scalable, tech-enabled operations: consolidated visibility, rules-based eligibility/concentration controls, automated margin workflows, and governance-grade reporting to manage volatility-driven volume spikes, intraday margin moves, and cross-border mobilization.

The Evolution of Solutions

Non-cash collateral can improve returns and risk outcomes for U.S. buyside firms, but it increases the operational load as derivatives, repo, and securities lending grow—tightening timelines and control standards. As a result, scale increasingly favors specialist third-party infrastructure over bespoke in-house builds.

Collateral segregation arrangements underpin this shift.

The model can consolidate assets into a single pool, centralize mobilization across counterparties, expand deployable inventory, and link financing (repo/securities lending) with margin needs—improving sourcing, optimization, and delivery without disrupting investment intent.

A key benefit is margin optimization, including efficient movement between VM and IM where allowed; limited cross-margining drives excess posting, slower inventory velocity, and liquidity drag, especially in volatility. Leading firms therefore outsource execution work and pair it with modular, tech-enabled platforms that deliver consolidated views, rules-based controls, automated workflows, governance-grade reporting, and local/global mobilization integrated with agency financing.

A Glance Ahead

Buyside use of securities as collateral is accelerating, supported by the regulatory expansion of eligible collateral. SEC Rule 15c3-3 historically limited borrower collateral to cash and U.S. government/agency debt; in March, an SEC no-action letter permitted broker-dealers to pledge specified customer equities when borrowing securities.

At the same time, firms are extending collateral segregation arrangements into cleared and uncleared margin management by leveraging bank/custodian central clearing counterparty (CCP) connectivity, plus tools like bilateral margin forecasting, cash vs. non-cash optimization, and data services (e.g. rate-curve projections).

Together, these shifts enable more scalable operating models and counterparty networks for dynamic non-cash collateral, improving liquidity readiness while supporting balance sheet and portfolio growth.

The J.P. Morgan approach to collateral optimization

J.P. Morgan’s Margin Services provides a fully outsourced, custodian-agnostic collateral management solution supported by a global operations team. By centralizing counterparty agreements and eligibility criteria, the platform delivers a holistic view of margin obligations and automates the end-to-end margin lifecycle—reducing manual processing and control risk while enabling clients to operate in an oversight model. For more details, download the whole whitepaper and reach out to our team for assistance.