Securities lending explained


Alpha (α) is a term which describes returns from investments over and above a particular predefined benchmark.

By adopting an active investment management strategy (that is, investing in a manner which does not merely track a benchmark), you aim to beat a benchmark. As an investment manager, you will often be benchmarking your performance against an index like the FTSE 100.

For example, by actively investing you generate 8% returns this year. Assume you’re benchmarking yourself against the FTSE 100. If the FTSE 100 were to generate 3% in the same year, then your alpha would be 5%.

Securities lending is an example of an alpha-generating strategy. Lending your securities, whether your investment strategy is active or passive, will allow you to outperform the benchmark. Securities lending is a major reason why some passive investment funds are able to outperform the benchmark they are tracking.

Alpha is used in finance to measure the performance of investment managers and is one of five popular technical risk ratios intended to help investors assess the risk-reward of strategies.

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    With securities lending, as with other investment activities, your capital may be at risk.

    Sharegain Ltd. is registered in England and Wales (no. 09600298) and is authorised and regulated by the Financial Conduct Authority (no. 730395).
    *This website is directed exclusively at and intended to be used only by professional investors and retail investors with direct holdings in stocks, bonds and ETFs in excess of £500,000. Our website is not directed at any person or institution where (by reason of nationality, residence or otherwise) the availability of our website or securities lending in general is prohibited. The material on this website is for general information and should not be considered as investment advice or solicitation to be involved in securities lending or to use one of Sharegain’s services. Securities lending involves risks and we have not and will not assess whether our service is appropriate for you. If you decide to lend your securities, your capital may be at risk. Please consult professional advisors if you are in any doubt as to whether the service would be beneficial for you or whether you require any consent or need to observe any formalities, before deciding to engage in securities lending.
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