It gets even better, the FT has discovered that MPs' own pensions are invested in a hedge fund manager, Quellos. Not only that, in addition the MPs' pension fund also made money lending stocks out to hedge funds to enable them to short shares. The hypocrisy is huge here, they condemn short sellers publicly and yet they roll up the profits of short selling in their pension plans.
Except that -
1. If you read the FT article (to the end, like) you find this para:
"A House of Commons spokesperson said pension fund trustees were “not able to opt out” of the terms of stock-lending arrangements required by managers of pooled funds in which the scheme held equities. In separate segregated funds, however, the custodian of assets appointed by trustees was not permitted to lend stock."
So the trustees have blocked lending where they are able to, but not where they... err... can't. If there's an issue here I think it's the lack of power of clients in pooled funds.
2. It's not clear to me either that an investor in a pooled fund would necessarily benefit from stock-lending in respect of the underlying securities (since they are technically a unit-holder, not the owner of the shares). Maybe the fund manager hoovers up the lending fees rather than the fund's investors. Anyone got any views either way on that?
3. We don't know that the stock that was lent in respect of the fund's pooled investments was used to short (on the basis of the article at least). As one investmemt consultant pointed out recently, most lent stock isn't used for shorting. So we simply don't know..
UPDATE: Actually Zedman points out I'm a bit off the mark on point 2 - managers usually do split the fees with clients. So Guido has a bit of a point afterall.