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Japan-home-of-GPIF

Short sellers could suffer as fund giant shuts stock lending

The world’s largest pensions fund, Japan’s GPIF, suspends the securities lending programme for its $370 billion dollar portfolio of foreign equity assets, Global Custodian reports.

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The Government Pension Investment Fund (GPIF) says it views its securities lending of foreign shares as ’lacking transparency’. According to Global Custodian, the decision to discontinue the activity could be a significant blow to short sellers, lending agents and others.

“The stock lending scheme may be reconsidered in the future if improvements are made to enhance transparency and address the inconsistencies cited,” the Japanese giant chips in, however, and securities lending is to continue regarding the fixed income portfolio.

“Leads to further questions”

GPIF presents its decision in the context of improvement on ESG: environment, social and governance aspects. When stocks are lent, so are their voting rights.

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Yet at least one securities finance expert, quoted by Global Custodian, is sceptic of the arguments given:

“Citing a lack of transparency for a Lender having been in a lending programme for several years seems to only lead to further questions. It could be that GPIF have had a change in decision makers at the top who are averse to securities lending but their reason given for suspension begs more questions than answers,” says the anonymous interviewee in the article.

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