Date: 11th May 2019

Securities lending is the practice of lending a stock, bond or other financial instrument in exchange for interest. Typically, the borrower pays a fee to the lender for the shares.

EU rules governing the practice of securities lending by UCITS funds, stipulate that 100% of the income from securities lending - net of direct and indirect operational costs - must be returned to the funds. Securities lending or repurchase agreements should always be aimed at increasing the return of the fund and can’t be used to generate surplus income for the fund management company. Yet in practice many asset managers pocket from a third to nearly half of the revenues generated from securities lending.