Income generated through securities lending may help offset some investment management fees.
Through the reduction of costs and fees through securities lending, additional value from participant portfolios can be unlocked and may also help plans meet their fiduciary obligations.
There are two risks to consider – the inability of a borrower to return the security and potential losses from the reinvested collateral.
Over 87% of BlackRock clients’ defined contribution (DC) assets are in lending strategies as plan sponsors seek to trim fees and improve tracking.1
Today, with new regulations and greater transparency since the financial crisis, securities lending activity reached approximately $48 trillion in assets available for lending globally in 2025.2 Many plan sponsors who did not participate in lending following the financial crisis are reexamining this longstanding practice as a potential way to unlock additional retirement portfolio value for their participants.
Income generated through securities lending may help offset a portion of investment management fees and improve net returns and tracking over time. Lower fees may help participants keep more of their investment return.
Reducing costs and fees through securities lending can help unlock additional value from participant portfolios and may support plan sponsors in meeting their fiduciary obligations.
Securities lending income is reflected in fund performance and can serve as a source of incremental return over time, helping to improve participant outcomes.
Here are the basics of securities lending: a large financial institution borrows a security in exchange for collateral in excess of the security’s value. Cash is the most common form of collateral in the U.S. and reinvested in a conservatively managed, OCC-regulated short term investment fund.
There are two primary risks in securities lending: the inability of a borrower to return the security and potential losses from the reinvested collateral.
BlackRock’s securities lending program is integrated into the firm’s global portfolio management platform, including research, trading, technology and risk management. This integration allows us to align lending activity with portfolio objectives and respond dynamically to changing market conditions.
Our approach is grounded in prudent risk management and supported by:
Robust borrower selection: Borrowers are assessed against conservative credit standards by an independent risk team, with ongoing monitoring and defined exposure limits.
Conservative collateral practices: Borrowers are required to post collateral in excess of the value of securities on loan, with exposures marked-to-market daily.
Disciplined cash reinvestment: Cash collateral is invested in high-quality, short-term instruments with a focus on capital preservation and liquidity.
Scale and market access: As one of the largest lending agents globally, BlackRock benefits from broad borrower relationships and a diverse supply of lendable assets, helping to support consistent demand and competitive lending opportunities.
Proprietary technology and trading capabilities: Our integrated platform and data-driven approach enable efficient execution, pricing, and allocation of lending opportunities across portfolios.
Every element of our lending activity is executed as a fiduciary, in our clients’ best interest, and with a disciplined approach to risk management. To learn more about what securities lending can do for your DC retirement plan, please connect with our dedicated defined contribution team.
At BlackRock, securities lending is treated as an integral part of the investment process, particularly within passive strategies where the objective is to track an index. In this context, lending is a key tool used that aims to deliver investment performance and reduce tracking error.
In addition to potentially generating incremental income, securities lending may help reduce the overall cost of investing. The scale of BlackRock’s lending funds allows us to spread operational and transaction costs across a large asset base, lowering the per-unit cost for investors. These cost benefits, combined with lending revenue, aims to improve net-of-fee outcomes over time.
As a result, a lending strategy for DC assets is not a separate strategy, but a built-in component of how certain investment strategies, especially index strategies, seek to enhance outcomes through a combination of lower costs and incremental return.
As of 2025, 87% of BlackRock clients' DC assets are in lending strategies.3
BlackRock’s securities lending program is designed to deliver risk-aware outcomes by combining scale, integration, and investment expertise.
As one of the largest lending agents globally, BlackRock benefits from a broad and stable supply of lendable assets and long-standing relationships with a diverse set of borrowers. This scale supports consistent demand for securities and helps drive competitive lending opportunities for client portfolios.
Our program is fully integrated with BlackRock’s investment platform, allowing for close coordination between portfolio management, trading, and risk teams. This integration helps ensure lending decisions are aligned with portfolio objectives while maintaining a strong focus on risk management and execution efficiency.
In addition, BlackRock’s proprietary technology and data capabilities support efficient pricing, allocation, and monitoring of lending activity, helping to optimize outcomes for clients.
As a fiduciary, BlackRock is responsible for managing securities lending activity in a manner consistent with clients’ best interests. This includes maintaining a disciplined approach to risk while seeking to generate incremental returns.
BlackRock oversees all aspects of the lending program, including borrower selection, collateral management, and cash reinvestment, within a framework designed to balance return and risk. Decisions are made with consideration for the overall portfolio and the needs of the end investor.
People have never been more challenged with how to spend down their retirement savings. A range of new solutions are emerging to help answer those needs.
Participants may look to borrow from their retirement plans during times of economic turmoil. We offer some guidelines to consider should they decide to do so.
1.BlackRock; as of 12/31/2025.
2.S&P Global Securities Finance; as of 12/31/2025. On loan figure includes market activity for asset owners only.
3.BlackRock; as of 12/31/2025.
The material does not constitute investment, legal, tax or other advice and is not to be relied on in making an investment or other decision.
This material is provided for educational purposes only and is not intended to constitute investment advice or an investment recommendation within the meaning of federal, state or local law. You are solely responsible for evaluating and acting upon the education and information contained in this material. BlackRock will not be liable for direct or incidental loss resulting from applying any of the information obtained from these materials or from any other source mentioned. BlackRock does not render any legal, tax or accounting advice and the education and information contained in this material should not be construed as such. Please consult with a qualified professional for these types of advice.
Investing involves risks, including possible loss of principal. Asset allocation models and diversification do not promise any level of performance or guarantee against loss of principal. Investment in the funds is subject to the risks of the underlying funds. The principal value of the funds is not guaranteed at any time, including at and after the target date.
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The opinions expressed in third party articles or content do not necessarily reflect the views of BlackRock. BlackRock makes no representation as to the completeness or accuracy of any third-party statement.
Securities lending involves exposure to certain risks, including cash collateral investment risk (i.e., risk that cash collateral investments, whether in Cash Collateral Funds or otherwise, may not achieve their investment objective, including suffering realized or unrealized loss due to investment performance), “gap” risk (i.e., risk that the return on cash collateral investments is insufficient to pay the rebate fees the Lending Fund or Lending Account has committed to pay to borrowers), liquidity risk (i.e., risk that the cash collateral is invested, directly or through the Cash Collateral Funds, in securities and other instruments that are less liquid than the Lending Fund or Lending Account, which could limit the liquidity available to the Lending Fund or Lending Account for ordinary course transactions), operational risk (i.e., risk of losses resulting from problems in the settlement and accounting process), foreign exchange risk (i.e., risk of a shortfall at default when a cash collateral investment is denominated in a currency other than the currency of the assets being loaned due to movements in foreign exchange rates), and credit, legal, counterparty and market risks. At any particular point in time, investments in the Cash Collateral Funds could comprise a material portion of a Lending Fund’s assets.
Risk management processes seek to mitigate, but cannot eliminate risk nor do they imply low risk. While proprietary technology platforms may help manage risk, risk cannot be eliminated.
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