BOSTON (Reuters) - Accused by Tesla Inc Chief Executive Elon Musk of making “excessive profit” by lending shares to short-sellers, top index fund companies shot back on Friday that they are only looking out for their investors.

FILE PHOTO: Tesla Chief Executive Elon Musk stands on the podium as he attends a forum on startups in Hong Kong, China January 26, 2016. REUTERS/Bobby Yip/File Photo

The responses from BlackRock Inc and Vanguard Group came after Musk criticized the index fund providers on Twitter, part of his long-running grudge with short-sellers betting that shares of his electric carmaker will fall.

Securities lending has emerged as small but significant source of extra returns for fund firms, a function they were quick to defend against Musk’s Twitter comments.

“BlackRock engages in securities lending to provide fund investors the ability to collect higher returns than they otherwise would receive,” BlackRock said in a statement sent by spokesman Brian Beades.

Short-sellers borrow stock and sell it into the market in hopes of buying it back at a lower price later and pocketing the difference, creating a market for securities lending by fund firms who split revenue from the activity with their own investors.

BlackRock, Tesla’s eight-largest shareholder, reported total securities lending revenue of $597 million in 2017, compared with $579 million in 2016, according to a securities filing. Musk cited the latest figure in a tweet on Friday afternoon.

BlackRock is the world’s largest asset manager, running a total of $6.3 trillion as of June 30, followed by Vanguard with more than $5 trillion under management.

Vanguard spokeswoman Carolyn Wegemann said via email that the firm’s securities lending program “is a source of additional income that can enhance returns for our shareholders.”

Wegemann also pushed back on another point Musk made on Twitter, when the CEO wrote that there is “no rational basis for a long holder to lend their stock to shorts,” who can attack the company and drive down total returns.

“Short selling provides greater price transparency and liquidity to the market,” Wegemann said. She noted market participants could also borrow securities for other needs like custody or brokerage functions.

A Tesla spokesman declined to comment.

Musk could be technically correct that funds make extra profits because it costs them little to run lending programs, said Neil Bathon, managing partner of Boston-based fund analysis firm Fuse Research Network.

But fund investors benefit from the extra income funds take in while any hit to the price of Tesla tied to shorts would have nearly no impact on a large index portfolio, Bathon said.

“The net impact to shareholders is decidedly positive from securities lending,” Bathon said.

In his Twitter post on Friday Musk also said “companies like BlackRock keep up to 50 percent of short interest revenue.”

BlackRock spokespeople pointed to filings and company disclosures that showed retail investors receiving around 71.5 percent or more of securities lending income, and said the revenue splits are fully disclosed to clients.

For instance, BlackRock’s largest Tesla fund holder is the iShares Russell 1000 Growth ETF, with 433,964 Tesla shares as of Sept. 30 valued at about $115 million, a small part of the fund’s $43.7 billion in net assets.

A recent fund filing stated that fund investors will keep between 65 percent to 75 percent of fees earned from securities lending, depending on total revenue metrics. During the 12 months ended March 31, investors in the ETF kept $4.6 million from securities lending, or 73 percent of the net income from securities lending.