Securities lending: Unlocking the potential of portfolios

Over the past several decades, securities lending has evolved into a vital component of the financial markets and an important benefit for ETF shareholders.

See below for answers to frequently asked questions on securities lending.

  • What is securities lending?

    Securities lending is the act where a fund loans a stock, bond or other security to a third- party large financial institution in exchange for collateral in an effort to incrementally increase returns for the fund.

  • How does it work?

    Securities lending starts when a large financial institution asks to temporarily borrow a security (e.g., a stock or bond) from a fund. In exchange for the security, the borrower pays a fee to the fund and provides collateral. The fund keeps the collateral to secure repayment in case the borrower fails to return the loaned security. The value of the collateral must exceed the value of the loaned security, to provide the fund with a “safety cushion” to prevent loss if the security is not returned by the borrower.

  • How do fund unitholders benefit from securities lending?

    Fund investors can benefit from securities lending in the form of additional revenue to the fund. How?

    The fund can generate additional income through the fee that it charges the borrower for borrowing securities. Any additional income earned from securities lending is then added to any distributions made by the fund to its unitholders.

  • How much do iShares ETFs benefit from securities lending?

    The performance contribution from securities lending varies by fund and asset class. Please refer to the funds’ Management Report of Fund Performance (MRFP) for specific dollar amounts. You can view the MRFPs for the Canadian listed iShares ETFs by clicking here.

    We periodically benchmark our securities lending performance versus competitors using data from independent third-party providers. Over three decades, BlackRock Asset Management Canada Limited and its affiliates have focused on delivering competitive returns while balancing return, risk and cost.

  • How much securities lending proceeds are returned to iShares ETF unitholders?

    iShares ETF unitholders receive 60% of the gross revenue from securities lending. BlackRock Asset Management Canada Limited has appointed its affiliates as the lending agents for the Canadian iShares ETFs. The lending agents retain 40% of the gross revenues. All costs of running the program are paid from the lending agents’ portions of the gross revenue.

    Please refer to the funds' Management Report of Fund Performance (MRFP) for specific dollar amounts. You can view the MRFPs for the Canadian listed iShares ETFs by clicking here.

    We encourage investors to ask ETF providers for detail on their securities lending program, and most importantly, the net returns to unitholders. While some fund providers may report paying out a higher percentage of the net proceeds from securities lending, they may not clearly disclose the portion of the gross proceeds they pay to their lending agents. We believe the net returns to unitholders, balanced with appropriate risk and fee disclosure, is the best gauge of investor benefits from securities lending.

    It is important to remember that some lenders are able to generate more return from a given basket of securities due to their scale, skill, or information advantage. Read more here on what makes our securities lending program -- and iShares ETFs -- different.

  • What makes BlackRock’s securities lending different?

    We believe in managing our securities lending operations on our proprietary platforms, rather than outsourcing this important function to a third party as many other investment managers do. To that end, we have built robust infrastructure so that every element of our lending activity is executed in our clients’ best interest and with prudent risk management.

  • Where can I find more information on securities lending practices for iShares ETFs?

    Our extensive risk management capabilities, proprietary technology, and stringent management processes set its securities lending practices apart. Read more here on what makes our securities lending program-- and iShares ETFs -- different.

iShares Securities Lending: Unlocking the Potential of Portfolios

Learn more about what makes BlackRock securities lending and iShares ETFs different

iShares® ETFs are managed by BlackRock Asset Management Canada Limited. Commissions, trailing commissions, management fees and expenses all may be associated with investing in iShares ETFs. Please read the relevant prospectus before investing. The funds are not guaranteed, their values change frequently and past performance may not be repeated. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional.

There is no guarantee that there will be borrower demand for shares of the iShares Funds, or that securities lending will generate any level of income.

iSHARES and BLACKROCK are registered trademarks of BlackRock, Inc., or its subsidiaries in the United States and elsewhere. Used with permission.