Securities lending 'does not adversely affect equity values'
13 September 2010 London
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New research suggests that fund managers who participate in securities lending programmes do so without 'generating adverse effects on the value of their holdings'.
The report, from the National Bureau of Economic Research, found that fund managers can earn substantial fees without jeopardising their fund's value.
The study was carried out in 2008 and 2009, when the researchers worked with a money manager to make available two-thirds of a high loan fee stock in the portfolio. In total, over USD800 million of stocks were lent.
The study says that while external market conditions will affect the fees for the securities lending, the fact that they were lent did not affect the underlying value of those stocks.
"Our general lack of results on the moments of returns and bid-ask spreads of the stocks whose shares experience an exogenous supply shock suggests that supply restrictions to shorting may not be an important factor for asset pricing," the report explained.
The report, from the National Bureau of Economic Research, found that fund managers can earn substantial fees without jeopardising their fund's value.
The study was carried out in 2008 and 2009, when the researchers worked with a money manager to make available two-thirds of a high loan fee stock in the portfolio. In total, over USD800 million of stocks were lent.
The study says that while external market conditions will affect the fees for the securities lending, the fact that they were lent did not affect the underlying value of those stocks.
"Our general lack of results on the moments of returns and bid-ask spreads of the stocks whose shares experience an exogenous supply shock suggests that supply restrictions to shorting may not be an important factor for asset pricing," the report explained.
NO FEE, NO RISK
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