Shares: Secretly lending Made Secret Billions

ISA and pension lending forcing down share prices

ISA and pension lending forcing down share prices

ISA and pension lending has been found to force down the value of your shares without your knowledge.

Research has shown that pensions and ISA’s owned by the public have been ‘lent’ to others by fund management groups. These groups then acquire a fee for ‘lending’ such shares, gaining themselves hundreds of millions of pounds of profits.

Secret lending decreases value of your money

This ‘lending’ goes on without the knowledge of the owner of the shares, and is carried out largely by hedge fund managers. These managers essentially push down the value of the shares during this lending process. By using the borrowed stock they are able to ‘short’ the shares. Fundamentally this means making money by decreasing the price of your shares.

This week, SCM Private, a small fund management boutique, alerted the public to these goings on.

The secret profits other groups take from your fund by stock lending.  SCM Private examined 20 funds, and found that 19 have made provisions to lend up to 100% of their clients’ shares.

Companies earn billions from covert lending

The fees earned are vast. In estimation, such dealings are worth around £850m; rarely some of these profits make it back to the client.

Research has shown that BlackRock takes 40% of the fees from stock lending for itself. Others, such as Fidelity, said that while they do lend stock they only take fees to cover costs, and that the profit goes back to the clients.

However, now all fund managers are in on the scandal, Neptune for example, has an estimated, £6billion in funds that it could lend but has chosen not to, to avoid a conflict of interest.

Robin Geffen, the company’s founder said: “When an investor gives you money, you buy the stock on the basis that you think it will go up. You don’t lend it to someone who takes the opposite position to you.”

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