The Los Angeles City Employees’ Retirement System’s securities lending program has maintained steady performance through 2025, bolstered by global market volatility and higher loan demand, according to Northern Trust’s latest update to the board.
During a recent board meeting, Todd Wandell, vice-president and relationship manager for securities lending at Northern Trust, said activity rose roughly 22% year-over-year, driven by ongoing geopolitical tensions and persistent inflation that continued to generate borrower demand across asset classes.
The program spans U.S. and global equities, U.S. treasuries, corporate bonds, and other global fixed-income assets, all of which are used to generate incremental income for LACERS. U.S. equities continued to be the largest contributor to lending revenue, said Wandell, noting revenue from corporate bonds has also increased as borrowers hedge rising yields, while some “special” or hard-to-borrow securities delivered outsized returns. Indeed, one Hong Kong-listed special security alone generated more than $215,000 in income.
Overall lending spreads were flat year-over-year between FY2024 and FY2025, said Wandell, citing program caps that limited expansion even as borrower demand grew.
LACERS’ custom cash collateral fund totaled just over $200M as of June 30, with 100% of holdings in overnight maturities. This structure prioritizes capital preservation and liquidity, though Wandell acknowledged it “doesn’t generate as much yield.” He added that staff is exploring whether modest adjustments to the reinvestment strategy could safely enhance income. Still, the program’s structure, he noted, ensures the cash backing those loans is there and that the fund is not impaired in any way.
Since 2018, LACERS’ securities lending program has generated more than $35M in gross income, with the pension fund retaining 80% of revenue and Northern Trust receiving 20% as the agent lender.
“I’ve always believed this is not a high-risk area for us — it’s an incremental income-generating program,” said Rodney June, LACERS’ chief investment officer.
