Finding Potential Yield in ETF Securities Lending
For a few years now, the song has remained essentially the same for institutional asset owners and the managers with whom they partner – cost pressure squeezes them incessantly, and with high valuations and low yields, meeting return expectations is a more elusive and difficult goal to achieve. To potentially add incremental portfolio performance and offset some holding costs, investors and managers have looked to perhaps the most versatile tool they can leverage: Exchange Traded Funds (ETFs), and the potential securities lending benefits they can provide.
How securities lending works, and transaction mechanics
Securities lending is a well-established practice in which an investor who owns a security temporarily loans the security to a borrower in exchange for a fee. The lender retains all economic interests of the security, and therefore maintains exposure to the security’s performance for the life of the loan. Because the t