"
As the name of the counterparties clearly states these are SYNDICATIONS"
Minor item first, I guess. A SYNDICATE is a group acting together for a purpose; in the financial arena that's often a group of lenders coordinating a sizeable loan, or a group of actors facilitating (underwriting) the new issue of a security. In this context, SYNDICATEs are generally temporary (unlike the LLC here).
https://financial-dictionary.thefreedictionary.com/syndicateIn contrast, a SYNDICATION is the act of
forming a SYNDICATE, or (often in the media context) an act of distributing (selling) something (such as a news column) to multiple buyers (who are not themselves a SYNDICATE).
https://www.merriam-webster.com/dictionary/syndicationKing Features Syndicate is a SYNDICATION
company in the business of putting out content in SYNDICATION. Just as
Zeitgeist Films is a distribution
company that is in the film distribution business. "Syndication", "distribution", these are
attributive nouns; as used, they're not standalone nouns.
You might have been thinking about
SYNDICATE desks, though there's no mention of "desk" in the company names.
Really, though, if we're going to read stuff into names, what should we make of the management company New York Alaska
ETF Management LLC? This company has never managed an ETF.
Though it tried; it filed in 2015 first to manage the "
1-3 Month Liquidity Bonds ETF", which later that year was apparently renamed "
1-3 Month Enhanced Short Duration ETF". It was to have traded under the ticker TBIL. Apparently it gave up the ghost at the end of 2016; last filing appears to have been 12/26/16.
https://sec.report/CIK/0001627597In the meantime (mid 2016), it proposed offering essentially a clone in open end form, called "
1-3 Month Enhanced Short Duration Fund". It wanted to use the ticker BILLX, but the
SEC felt that this sounded like a MMF. Ultimately this evolved into what you know and love as the "Enhanced Ultra Short Duration Mutual Fund", STATX.
"
I called up the fund, asked them questions and they explained it all to me and gave me a lot of info on this Repo and Securities lending industry. ... iShares, which is one of the biggest fund managers in the world, actually does the same thing ... [see] [a link to an article on securities lending]"
This may be the most disconcerting statement so far. The fund is conflating reverse repurchase agreements with securities lending.
While they look very similar, they're quite different. I'll try to illustrate with an analogy.
I own a house. I give you use of the house for a fee. (In real estate terms, I'd be leasing it to you.) You can use the house as you wish (e.g. sublease it), so long as you pay me the rental fee and return it to me as we agree upon.
I own a house. I need cash, so I turn it over to a third party as collateral (via a deed of trust), you give me cash, and I sign a promissory note that says I'll pay you back with interest. This use of third party trustee and promissory note is the way "mortgages" are effected in many western states.
Notice that either way, you get the house, I get cash to use. In the first, I'm "lending" you the use of the house and making a profit on the rent. In the second, I'm borrowing money and putting up the house as collateral. You're the one making the money here.
I own some securities. I give you the use of those securities (lending them to you, perhaps so that you can sell them short, who knows?). You pay me "rent" for the use of the securities. That's what iShares does, that's what most funds do to make money. It's how Vanguard sometimes manages to beat the indexes it's tracking, in spite of its expenses. We're talking relatively small amounts here (i.e. barely enough to cover index funds' costs).
I own some securities. I need cash. I sell sell them to you (effectively giving you collateral for the money you "lend" me). We make an agreement that I will give you back the cash with interest (i.e. repurchase the securities for a higher price) at an agreed upon time. What we've made is a repurchase agreement.
Notice that either way, you get the securities, I get the cash to use. In the first, I'm lending you the use of the securities and making a profit on the "rent". In the second, I'm effectively borrowing money and putting up the securities as collateral. You're the one making money here.
Two very different arrangements despite superficial similarities. The fact that you were told that these are the same I find quite disturbing. I begin to understand how Mona could have been told that the fund accrues dividends daily.
Here's
Vanguard's paper on how it lends securities. A key takeaway is on p. 6 - all the measures that Vanguard takes to minimize risk in these transactions. They include limiting the amount of loans to any one counterparty. I have faith in Barclays as well. What's New York Alaska ETF Managment doing to protect your investment?
