An $85 billion industry superannuation fund has urged its custodian to immediately recall all shares currently out on loan, while hinting other funds should follow its lead.
UniSuper told its custodian BNP Paribas Securities Services to freeze its stock lending program on Monday.
Following the market fluctuations as fears about the coronavirus outbreak took hold, the fund’s chief investment officer, John Pearce, commented limiting the ability to short-sell is in the best interests of the market.
“In a normally functioning market we’re comfortable lending our shares as we genuinely believe that it adds to market efficiency,” Mr Pearce said.
“The ability to short-sell adds to liquidity and price discovery in an orderly market. However, we are now in a market gripped by panic and we believe that restricting the ability to short-sell is in the best [interests] of promoting a more orderly market.”
However, he added, the result will depend on how many other funds follow suit.
“We are only one fund and the efficacy of our actions will depend on how many other funds follow a similar path,” Mr Pearce said.
“Of course, we are not privy to the thinking of other funds who lend their stock.”
As at 3pm on Monday afternoon, the ASX 200 had fallen 7.46 per cent to 5,120 points.
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].
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