Fund groups are making millions of pounds by lending out client money to speculators, new research from wealth manager SCM Private has claimed.
SCM, founded by ex-New Star chief investment officer Alan Miller and his wife Gina, told the Guardian some of the top money managers in the country were making tens of millions of pounds by loaning client money out to be used for stock lending.
According to the research carried out by SCM, 19 of the 20 funds it analysed had made provisions to lend up to 100% of their clients' shares, with half actually participating in stock lending.
Gina Miller said: "Many investors will not be aware that certain retail funds are legally permitted to potentially risk 100% of their savings through stock lending.
"Clear and full disclosure regarding stock lending should be mandatory to protect investors. In our opinion, the minimum levels of disclosure and protection for retail investors contained within UK legislation are totally inadequate.
"The FSA needs to address the key issues of risk and transparency across the whole retail investment industry so retail investors can make fully informed educated decisions."
The practice of stock lending - where shares are loaned to a third party for a fee and collateral - can generate extra returns for investors, and is commonplace across markets.
The borrower of the shares can use them for short-selling, but if the borrower goes bust there is a risk the owner could lose out.
The SCM research does not name specific funds which carry out stock lending.
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