From the November 2009 issue of Treasury & Risk magazine

Plan Sponsors Revisit Risks Involved in Securities Lending

Companies that sponsor retirement plans haven't abandoned securities lending on a wholesale basis in the wake of last fall's problems, but many are taking measures to rein in the risks involved.

Securities lending has traditionally been regarded as a safe way to offset some of a pension plan's costs or bolster its returns. After all, when a portfolio lends out securities, usually to a party that is shorting the stock, it receives cash collateral in return. But last fall, as the markets became increasingly illiquid, some companies suffered losses on the investments in which they had placed their collateral, a development that aroused skittishness about the whole practice of securities lending.


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