Most equity mutual funds do not short stocks, but that doesn't mean the big name fund companies aren't making a mint from the surge in short selling by hedge funds. The Financial Times notes the likes of Fidelity Investments and American Funds are generating some much welcome fee revenue by loaning shares. They charge a fee of course, as does the custodian. These borrow fees, which we've noted have been going up, account for less than half the revenue from a stock loan. The fund firms and custody banks also reinvest the collateral that the short-seller has put up. As of now, that is generating twice the fee revenue, the FT notes. All in all, this is very lucrative. It's unclear exactly how much fund companies have generated. Custodian State Street, however, generated $303 million in fees from its stock lending business in the first quarter, up more than 200 percent from a year ago.

For more:
- here's the FT article

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