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.

Collateral reinvestment losses were the top concern cited by 72 plan sponsors and funds surveyed by investment consulting firm Callan Associates earlier this year. The survey found that nearly 80% of those surveyed were interested in greater disclosure about their lending program's structure and risks, and many were reviewing their programs' investment policies.

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