Plan sponsors have their securities lending programs under the microscope, trying to capture as much return as possible, rather than simply running on autopilot, according to industry observers.
"Every pension plan should actively manage their securities lending program and ask hard questions about risk, risk management and about whether they're getting the proper return and the proper fee split," said Susan C. Peters, chief executive officer of eSecLending, Boston, a firm that manages securities lending programs for institutional investors.
"Even asking a few simple questions … will lead to better returns," she said. "More and more (plan sponsors) are beginning to ask those questions and are probing harder on securities lending."
In the past, she said, securities lending "was viewed as extra gravy" by plan sponsors, and there was little, if any, discussion of how the programs were being handled.
Sarah M. Wotka, senior vice president, securities lending at State Street Corp., Boston, said there's been a natural evolution toward more plan sponsors actively supervising their securities lending programs, as the flow of information from the securities lending agents to plan sponsors has increased.
"People are taking more interest because there's more information out there," she said. "They're more able to evaluate and look at the securities lending program."