The London Pension Fund Authority (LPFA) will resume stock lending this week after a near six-month suspension.
The LPFA, one of the UKs largest local authority schemes with assets of GBP3.7 billion, spoke to reporters at the National Association of Pension Funds investment conferences.
Mikes Taylor, chief executive of the LPFA stated: “We had been effectively delegating our stock lending to a custodian and we hadn’t understood the potential risk around cash collateral.”
LPFA stopped its lending program after the collapse of Lehman Brothers in September 2008.
He said trustees queried whether “stock lending is evil because it leads to short selling.” Taylor added: “There’s no evidence to say it is.”
The LPFAs change in attitude comes just before the March-July period, the most profitable time for lenders.