Fund performance and equity lending: Why lend what you can sell?

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11 Citations (Scopus)


The dramatic increase in the percentage of mutual funds lending equities suggests that lending fees are an increasingly important source of income for investment advisors. We find that funds that lend equities underperform otherwise similar funds in spite of lending income. The effect of lending is concentrated in funds that cannot act on the short-selling signal due investment restrictions set by the fund family to diversify their fund offerings across styles. Our findings suggest that the family organization explains why fund managers lend, rather than sell, stocks with short selling demand.

Original languageEnglish
Pages (from-to)1093-1121
Number of pages29
JournalReview Of Finance
Issue number3
Publication statusPublished - May 2017


  • Index funds
  • Mutual funds
  • Performance
  • Security lending


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