The “Sharpe” point of securities lending

We evaluate securities lending using a portfolio‑construction lens, focusing on incremental returns relative to marginal risk and diversification benefits. Using data from more than 5,000 anonymized and aggregated securities lending programs spanning 2008–2023, we assess lending returns relative to realized losses. While absolute lending returns may appear modest, the evidence shows that incremental returns are high relative to risk, particularly during periods of market stress. In addition, securities lending returns exhibit low or negative correlation with traditional asset classes, indicating meaningful diversification benefits within institutional portfolios.