A quarter of money managers have stopped their securities lending programs this year, according to a new report by financial research consultant Finadium LLC.
The managers who have ceased securities lending represent 6% of the $8.4 trillion managed by the 27 investment managers surveyed in April and May, said Josh Galper, managing principal of Finadium, based in Concord, Mass.
Managers representing an additional 22% of assets said they have dramatically reduced their securities lending activity.
Thats a big change from a year earlier, when only 13% of managers surveyed said they werent active securities lenders and everyone who was surveyed was lending at least some of their securities, Mr. Galper said in an interview.
Mr. Galper is the primary author of Finadiums Leading Asset Managers in Custody, Securities Lending and Collateral Management 2009 report, published this month.
The money managers included in Finadiums universe were mutual fund, commingled trust and hedge fund managers that are beneficial owners of the securities in their portfolios and responsible for making the decision about lending those securities and about how the collateral pools that back the lending programs are managed.
The managers clearly were not immune to the pressures of headline risk from losses incurred in many securities lending programs last year, Mr. Galper said.
We got a real sense in talking to money managers this year that they are getting a lot more questions than ever before from their clients about the securities lending programs of the funds they are invested in, he said.
He noted that most of the firms in the universe that have stopped or significantly reduced their lending activities in 2009 are smaller companies whose executives said the boards of the funds had a knee-jerk reaction to news of securities lending losses and pulled the plug on lending.