Barclays Global Investors has been leader in the exchange-traded funds business, but it also actively engages in another lucrative aspect of the business—securities lending, which in Barclays case, involves loaning out the stocks and bonds in its iShares ETF portfolios, according to The Wall Street Journal. The loans bring in millions of dollars a year for Barclays in addition to the fees it gets for managing the fund. The practice is not new, but it is growing more common in the industry, and it as has particular appeal for ETF providers. The profits can boost an ETF’s returns, and a small amount of additional income can make performance appear significantly better. Barclays’ loans boost its profit from some of the index-tracking funds by double-digit percentages, typically near 10%. For ETF investors, the income that iShares funds receive from lending generally increases returns by .01% to .15%, according to Barclays. Barclays says it runs its program in the interest of fund shareholders and complied fully with Securities and Exchange Commission rules when setting up its lending process. It splits proceeds 50-50 between the fund-management company and its iShares ETFs. The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.
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