Securities Lending Activities in Mutual Funds and ETFs

Ethical Considerations

Research output: Contribution to journalArticle

Abstract

Securities lending has been a lucrative business for mutual funds and exchange-traded funds (ETFs) over the past decade. Unfortunately for investors, the sponsors of these funds have not been very transparent with the details of their securities lending programs, and consequently most investors in these funds are unaware of their exposure to the risks inherent in securities lending. Interestingly, most funds do not return the full profits from securities lending activities to their investors. In this paper, we examine and discuss the ethical considerations related to the securities lending activities of mutual funds and ETFs and offer a series of best practices that we believe will provide better transparency of these activities to fund investors.

Original languageEnglish
JournalJournal of Business Ethics
DOIs
StateAccepted/In press - Mar 18 2015

Fingerprint

lending
investor
transparency
best practice
profit
Mutual funds
Lending
Exchange traded funds
Investors

All Science Journal Classification (ASJC) codes

  • Business and International Management
  • Economics and Econometrics
  • Business, Management and Accounting(all)
  • Law
  • Arts and Humanities (miscellaneous)

Cite this

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abstract = "Securities lending has been a lucrative business for mutual funds and exchange-traded funds (ETFs) over the past decade. Unfortunately for investors, the sponsors of these funds have not been very transparent with the details of their securities lending programs, and consequently most investors in these funds are unaware of their exposure to the risks inherent in securities lending. Interestingly, most funds do not return the full profits from securities lending activities to their investors. In this paper, we examine and discuss the ethical considerations related to the securities lending activities of mutual funds and ETFs and offer a series of best practices that we believe will provide better transparency of these activities to fund investors.",
author = "Dunham, {Lee M.} and Randy Jorgensen and Washer, {Kenneth M.}",
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AB - Securities lending has been a lucrative business for mutual funds and exchange-traded funds (ETFs) over the past decade. Unfortunately for investors, the sponsors of these funds have not been very transparent with the details of their securities lending programs, and consequently most investors in these funds are unaware of their exposure to the risks inherent in securities lending. Interestingly, most funds do not return the full profits from securities lending activities to their investors. In this paper, we examine and discuss the ethical considerations related to the securities lending activities of mutual funds and ETFs and offer a series of best practices that we believe will provide better transparency of these activities to fund investors.

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