The California Public Employees’ Retirement System (CalPERS) today announced a temporary pullback of shares of four financial institutions in its Securities Lending Program.
No other companies whose shares are in the pension fund’s public stock portfolio are affected.
“We are temporarily restricting the securities of Goldman Sachs, Morgan Stanley, State Street, and Wachovia,” said Anne Stausboll, Interim CalPERS Chief Investment Officer. “We want to do our part and help mitigate the current instability of the market and any potential adverse short-selling impact on these important financial institutions. Our Securities Lending Program otherwise will remain the same.
“We will continue to monitor the situation and remain in close communication with agents and our borrowing counterparts. We anticipate lifting these loan restrictions once the market volatility abates,” Stausboll said.
“Meanwhile, we will remain an active participant in securities lending, which we believe is an important mechanism in the financial markets that provides crucial liquidity and contributes to the orderly, efficient operations of the global financial system. We believe our action to temporarily restrict certain U.S. financial securities from lending will help improve the current instability in the market.”
Securities lending is an investment strategy through which institutional investors lend securities to borrowing institutions in order to earn incremental income on their portfolios.
CalPERS launched its Securities Lending Program in the early 1980’s as an effort to earn additional income on its existing portfolios. Over the last eight years, CalPERS has auctioned off $779 billion in assets through 30 separate auctions. The program has $38 billion in shares and cumulative net earnings approaching $1.2 billion. Over 73% of the total cumulative income has been generated in the last eight years since moving to an auction-based platform.
CalPERS is the nation’s largest public pension fund with assets totaling approximately $220 billion. The System provides retirement and health benefits to approximately 1.5 million State and local public employees and their families. For more on CalPERS, visit www.calpers.ca.gov.
