Investing · Jurisdiction EU

Securities lending in a fund

A UCITS may lend securities. ESMA requires that it can recall them at any time or end the lending agreement. The fee is not a free extra.

In more detail

Securities lending sits among efficient portfolio management techniques. The prospectus and the risk process must name counterparty risk and conflicts of interest. Direct and indirect costs may be deducted from the revenue, with no hidden income. The net revenue goes to the UCITS. Finmon does not say whether a fund should lend.

Background

Read next to ETFs, counterparty risk, costs and the prospectus: lending can bring a fee and a counterparty risk. Both belong in the documents, not in a slogan.

An example

A fund lends shares from its holdings and receives a fee minus the costs of the lending programme. The net amount belongs to the fund. Whether the programme runs is in the prospectus.

A common misconception

Securities lending is extra money with no risk and no cost.

ESMA requires disclosure of counterparty risk and costs. Only the net revenue goes to the fund, and the fund must be able at any time to recall the securities or end the lending agreement.

Source: ESMA · ETF and UCITS guidelines. Last reviewed: 2026-10-31. Editorially reviewed on 2026-10-31. Next review 2027-10-31. Version 0.2.0. Finmon explains. It does not advise. Not investment, tax or legal advice.