centro told to sell assets, page-17

Stole the following off of the ASX general thread but WOW could this be the beginning of the end for shorters on CNP. If they can't short it we are going to really fly - now this is good news:

Superannuation fund ceases share lending

By Adele Ferguson
March 24, 2008 12:46am
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ONE of Australia's big pension funds, Equipsuper, has publicly withdrawn from share lending, in what is expected to be the start of a mass exit for stock lenders until market integrity is restored.

Other superannuation funds are believed to be carefully consulting fund managers to see whether they should continue to lend their stock in the current climate.

Robin Burns, chief executive of Equipsuper, which has almost $5 billion in funds under management, said the fund had decided to halt its share lending program, based on concerns of market manipulation by short selling.

He said that when the regulators got their act together and introduced transparency to the sector, his fund would return to lending its shares.

"The markets are becoming much more volatile in a bear market and it is not in the best interests of our members to lend out shares, particularly if the shares are being used to short stocks and drive the shares below what they could otherwise reach," Mr Burns said.

Australia's $1.1 trillion superannuation industry warehouses its shares with "custodian" companies, which offer a discount for the service if the fund allows the shares to be lent to third parties.

In the current bear market, hedge funds are deliberately targeting certain companies by borrowing shares and then selling them in the hope of repaying the loan of the shares by buying them back cheaper at a later date.

The practice can put downward pressure on shares, triggering margin calls for investors who have borrowed to buy stock, potentially driving shares even lower.

The practice is having an adverse effect on some share prices and therefore working against the returns of super funds.

Under superannuation legislation, the SIS Act, funds need to exercise the "degree of care, skill and diligence as an ordinary prudent person would exercise in dealing with property of another for whom the person felt morally bound to provide".

David Bryant, group executive of investments at Australian Unity, which has $6.4 billion in funds under management, likened the practice to leaving a car in a car park, which lends it to local hooligans, who return it damaged.

The owner is left with the mess. "It really is that simple," he said. "And if you put margin lending into the mix, the practice adds to margin calls."

Mr Burns said Equipsuper was not against securities lending or short selling, but he would like to know what the short sellers' true positions were. "Once there is greater transparency and disclosure of all short positions, it is highly likely we will look at lending again," he said.

Mr Burns said that, in the current environment, the fund was no longer satisfied with the risk involved in securities lending, and said the returns were not significant enough to affect the fund's performance.

He dismissed comments in the market by at least one securities lending agent that it was "cheeky" for a fund to pick and choose when it would add its revenue and liquidity to the market. "I don't think it will be an issue for us to return at all," he said.

"Custodians require a supply of stocks on loan, and they are always interested in new clients."

He said other super funds were also looking at whether the practice was appropriate in the current environment.