ICI writes "The Facts on Mutual Funds and Securities Lending" on its Viewpoints page. They say, "Recent stories in the press have addressed the issue of securities lending, particularly in the context of 401(k) plans. For example, a March 16 story in the Wall Street Journal ("Disclosure Sought on Fund Lending") suggests that securities lending' in 401(k) plans "prevented some employers and investors from withdrawing their money during the financial crisis." A few clarifications are in order. The Journal article correctly states that mutual funds, like many investment pools, lend securities (typically to broker-dealers). Doing so allows mutual funds to generate incremental income and improve total returns with a reasonable amount of additional risk. Securities lending also provides liquidity to the market by enabling brokers to cover failed trades or short positions. But when the Journal's story refers to plan sponsors being restricted from withdrawing from an investment option that participated in securities lending, it is not referring to mutual funds, but rather to non-registered investment pools offered to retirement plans."

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