One of Australia's largest superannuation funds has taken a precautionary approach to market volatility caused by the Covid-19 outbreak, suspending its stock lending program effective immediately.
Unisuper, a $85 billion superannuation fund for the higher education and research sector, has instructed its custodian BNP Paribas Securities Services to recall all shares currently out on loan, without exception.
"In a normally functioning market we're comfortable lending our shares as we genuinely believe that it adds to market efficiency," says Unisuper's chief investment officer John Pearce.
"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 interest of promoting a more orderly market."
Pearce added, "We are only one fund and the efficacy of our actions will depend on how many other funds follow a similar path. Of course, we are not privy to the thinking of other funds who lend their stock."
Updated at 2:17pm AEDT on 16 March 2020.
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