A story I wrote for The Wall Street Journal details how the Guggenheim Solar ETF beats its index with help from securities lending. Though an extreme case, the fund’s semi-annual report shows that roughly 26% of the fund’s securities were on loan as of Feb. 28, and the fund had earned nearly $3.3 million in just six months from lending. (It’s worth noting that this income is not tax advantaged, unlike dividends and capital gains.)
That’s a healthy clip for a nearly $500 million fund. Remember, the securities are over-collateralized and can be pulled back at any time, including to meet redemptions, if needed, according to my conversation with William Belden, Guggenheim’s head of product development.
Finding sec lending stats on an ETF mean looking at the fund’s income statement (see income from securities lending) and the balance sheet, where you will find cash for securities on loan and total securities on loan at value.
See pages 25 and 26.
Also worth noting is the percent of securities lending income earned by the fund. Many funds report 100% - see ETF.com/TAN under “Efficiency.” Though some fund/agent splits can be less. What’s difficult to argue in the sec lending world, however, is that fee split/share says little about the efficacy, efficiency and skill of the lending agent…i.e. are they doing all they can for the fund.
Here’s an old piece I wrote that details sec lending arrangements for ETFs.