In what we see as both a sign of the times and a harbinger of things to come, the Financial Times reported yesterday that Blackrock will begin publishing its securities lending collateral holdings for Dublin-domiciled ETFs. This follows a January 2011 announcement that BlackRock would begin publishing more securities lending data for all of its funds. However, these announcements have not yet translated into meaningfully greater disclosure levels for the average investor.
According to the FT, “Investors will be able to see the underlying collateral holdings for each Dublin-domiciled iShares fund that has securities on loan. Annual revenue from securities lending and additional information will be available in a separate document.”
The value of these new disclosures is on the collateral side. Securities lending revenue information is available from ETF annual reports, and BlackRock reports also show the amount paid to the securities lending agent (in this case, also BlackRock). These reports do not contain collateral information or any details on what securities are actually on loan, but do give an indication about what kind of importance an ETF complex places on securities lending revenues.
Blackrock’s new commitment to disclosure seems to raise the ante for mutual fund and ETF managers. If Blackrock does finally release full details on collateral holdings as well as what securities are on loan, it becomes possible to more closely evaluate the risks and returns of securities lending at a fund level. This would provide significant and helpful information to investors and would press other fund managers to provide similar disclosures.
The FT article is here.