Super funds will face higher custody fees as custodians’ securities lending revenue declines on the back of ASIC’s short-selling ban, industry experts say.

The head of investment consulting at Watson Wyatt, Graeme Miller, said that while the revenue credited to super funds from their securities lending programs had “not been large in the scheme of things”, the programs had been an important cross-subsidiser of basic custodial activities. “You’d expect some pressure to come on to what’s being charged for traditional custodial activities like settlement and reporting,” Miller said. One custodian, who preferred not to be named, estimated that about 50 per cent of stock in super funds’ securities lending programs would be affected by the ban, but he said it was too early to say whether custody fees would rise as a result. Funds can still lend for activities such as index management arbitrage, as long as the borrower obtains written confirmation from the lender to cover borrows for authorised market maker activity. Funds also get some revenue from fixed interest lending, although this is much smaller than stock lending.