Securities Lending Definition

Learn the definition of securities lending and other ETF terminology from the etf.com glossary.

ETF
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Reviewed by: etf.com Staff
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Edited by: etf.com Staff

Learn more about Securities Lending

Securities Lending is a strategic practice employed by ETFs to enhance overall fund returns. In this process, ETFs lend out a portion of their portfolio securities to institutional borrowers, typically in exchange for collateral. By temporarily transferring ownership of these securities, ETFs generate additional income, supplementing their returns for the benefit of investors. While this practice introduces a level of risk associated with the borrower's ability to return the securities, diligent collateral management mitigates these risks, making securities lending a valuable tool for ETF managers seeking to optimize the fund's performance and provide enhanced value to investors.

Related Terms

ETF Glossary is etf.com’s collection of key terms and definitions related to exchange-traded funds. ETFs are investment funds that are traded on stock exchanges, and they can encompass a wide range of asset classes, including stocks, bonds, commodities and more. Given the diverse range of ETFs and the complexity of financial markets, having a clear understanding of ETF-related terminology is instrumental for investors looking to make informed decisions, manage risks effectively and navigate the evolving landscape of ETF investments.