OEIC Securities Lending Activities

[BT63]

Not quite a unit trust but probably was once a unit trust......

I recently received a letter from HSBC Asset Management regarding HSBC's index tracking OEICs (FTSE All-share and FTSE Midcap) which I hold with them.

It stated that they are about to commence securities lending activities (up to mid-20s percent of each fund). They mention it might slightly enhance returns for investors due to lending fees, but might also result in collateral from a defaulter not covering the value of what was loaned, which might result in losses for investors.

The funds only amount to around 5% of my total investments, so unlikely to suffer any serious losses from a default and I won't be selling up.

But I'm curious; do most pooled funds do this nowadays? Have any taken a hit from securities lending defaults?

[GeoffF100]

Google found this:

https://www.morningstar.com/articles/90 ... es-lending

[GrahamPlatt]

Google found this:

https://www.morningstar.com/articles/90 ... es-lending

Having read that I see that the cash collateral reinvestment risk is the problematic part: This is now mitigated in the States by the SEC’s edict in 2010 only to invest in quality... but does HBSC Asset Management have to abide by that or is it - as I think it will be - outwith that jurisdiction?

[GeoffF100]

Google found this:

https://www.morningstar.com/articles/90 ... es-lending

Having read that I see that the cash collateral reinvestment risk is the problematic part: This is now mitigated in the States by the SEC’s edict in 2010 only to invest in quality... but does HBSC Asset Management have to abide by that or is it - as I think it will be - outwith that jurisdiction?

Yes.