Returns generated from securities lending can offset tracking error and costs of ownership. But how transparent is this activity? Helen Fowler reports
Investors who buy ETFs might be excused for thinking the shares underpinning the product are locked away safely in a vault belonging to whoever issued the fund. Such a belief would be understandable, but mistaken. The shares are more likely to be on loan elsewhere. Investment firms treat securities like library books, routinely lending them out in an attempt to earn extra fees. ETF issuers are no exception, lending out baskets of stock to firms who need them for trading strategies such as short selling. Some argue that ETFs are especially well suited to lending stock. Margins a...
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