Most mutual funds generate extra revenue by lending the securities in their portfolios to short sellers. After all, the shorts have to get it from somewhere!
But here's the question: Where does this revenue stream go? For a multi-billion dollar fund, the revenue could be millions. I read once that iShares credits half the revenue to the unit holders, and half to management; essentially a 50% MER on lending the unitholders' assets.
But good luck finding out what other mutual funds do!
And if you have a portfolio of stocks 'on book' with a broker; do you even know whether these are being lent to shorts to bet against your long position? If the brokerage is lending your stock, do they pay you anything for it?
But here's the question: Where does this revenue stream go? For a multi-billion dollar fund, the revenue could be millions. I read once that iShares credits half the revenue to the unit holders, and half to management; essentially a 50% MER on lending the unitholders' assets.
But good luck finding out what other mutual funds do!
And if you have a portfolio of stocks 'on book' with a broker; do you even know whether these are being lent to shorts to bet against your long position? If the brokerage is lending your stock, do they pay you anything for it?