Lending out ETFs is where institutions and individuals could be making a lot more money. While providers of exchange-traded funds battle for customers by offering the lowest fees on their products, there’s another way of reducing the cost of owning them where demand is booming.
It’s the lending market, where institutions have long buttressed their bottom line by making shares available to borrowers who use them for purposes such as going short. While a vast mechanism exists for getting individual stocks into the hands of those who would take them on loan, new research says lending out ETFs is where institutions and individuals could be making a lot more money.