What Is A Securities Lending Program?
Historically, investment managers have sought to be “fully invested,” to maximize returns for their investors (and their performance fees), but with reserves of cash and cash equivalents to meet redemptions in the ordinary course. Many of these investments have been relatively long-term, where positions have been established to meet forecasted needs rather than trading gains based on short-term changes in value. Securities lending programs have historically been employed to generate additional income on securities portfolios, especially these kinds of positions. Typical investment management agreements authorize the investment managers to engage in securities lending. In securities lending, the investment manager directs the plan custodian to deliver (“lend”) securities to counterparties in exchange for collateral (typically cash or government securities) in an amount or with a value that exceeds by a small margin the value of the loaned securities as of the date of the loan. The count
