Securities Lending Revisited

In the fall of 2008 Securities Lending programs came under increased scrutiny from institutional investors.  At that time NEPC published our outlook on Securities Lending programs focusing on the factors underpinning the crisis and our future expectations for securities lending in institutional portfolios.  In the last two years since the collapse of Lehman Brothers in September 2008 a cascade of events helped illuminate the embedded risks within the majority of securities lending programs.  The purpose of this paper is to revisit our original comments, to provide further guidance on securities lending programs and to develop a framework which investors can use to help inform their decisions surrounding securities lending program structure.