BlackRock is launching a stock lending programme that will see 37 of its retail funds lend out assets to generate performance-boosting fees.
The programme starts on January 17, 2011 and will include the £2bn UK absolute alpha fund, £1.6bn UK dynamic fund,
£1.1bn special situations fund, £640m UK fund, £639m cash fund, £544m cautious portfolio fund and £501m UK income fund.
The technique takes advantage of the need of other market players such as hedge funds to borrow stocks in order to short sell them, for example.
Managing director Tony Stenning says: “The borrower pays a fee for the loan of the securities which provides the fund with some additional income.”
He says 60 per cent of the income goes to the funds and 40 per cent goes to lending agent BlackRock Advisors.
The firm says the borrowers will be obliged to hand over collateral in case they collapse and fail to return the stocks.
Stenning says: “There remains the very slight risk of loss should the borrower go out of business before the securities are returned and, due to market movements, the value of collateral held has fallen and/or the value of the securities on loan has risen.”