Top fund continues financial stock lending bar

By Raji Menon

LONDON (Reuters) - The country's largest pension scheme, the BT Pension Scheme, will retain most of the financial stocks that were put on its lending stop list in September due to fears that some will face fresh "attacks" from punters, its fund manager Hermes said on Wednesday.

The move comes despite the Financial Services Authority's decision to end its short-selling ban next week.

To execute their trades, short-sellers often borrow stock from institutions such as pension schemes. As a result, stock lending volumes are seen as a reliable proxy indicator for levels of shorting activity.

"There is potential for some of those companies to face unhelpful attacks that may damage the interests of long-term shareholders," said Paul Lee, a director of Hermes Equity Ownership Service.

He added that the fund manager would continue to ban stock lending for a majority of the 20 British and global financial companies that it had placed on its lending stop list in September.

The BTPS has around the 39.7 billion pounds in assets under management.

Other large pension schemes including the London Pension Fund Authority, the Strathclyde Pension Scheme and the UK corporate scheme of German energy firm E.On (EONGn.DE) have also decided to retain suspensions on their stock lending programmes.

Richard McIndoe, head of pensions at the Strathclyde Pension Scheme, which has assets of over 8 billion pounds, said: "We will review (suspension of stock-lending) over time but at the moment we are still keeping it."