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Monday Morning Memo: A Brief View of Measures to Identify "Closet Trackers"
March 12, 2018--A topic widely discussed in the European fund industry is actively managed funds that seem simply to follow an index without adding value for investors, while the management company charges fees for active management-so-called closet trackers.
For me it is clear that active funds should add value to investors, either by reducing the risk attached to the market or by generating outperformance compared to their index. In this regard, I agree with the current investigations into these funds by the authorities of some European countries, since retail investors-especially-need protection.
But the point I don't agree with is how the activity of a portfolio manager should be measured. It is mainly done with the so-called active share-a ratio that measures how widely the constituents of a portfolio differ from the constituents of its respective index.
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Source: Thomson Reuters
Capital Markets Union: covered bonds, cross-border distribution of investment funds and cross-border transactions in claims and securities
March 12, 2018--How are today's proposals linked to the Capital Markets Union (CMU)?
The Capital Markets Union is one of the priorities of the Juncker Commission to strengthen Europe's economy and stimulate investments to create jobs. The CMU aims to mobilise and channel capital to all businesses in the EU, particularly small and medium enterprises (SMEs) that need resources to expand and thrive.
While the CMU will be beneficial for all EU Member States, it will particularly strengthen the Economic and Monetary Union.
Building on progress already achieved since the launch of the CMU in 2015, today's proposals will boost the cross-border market for investment funds, promote the EU market for covered bonds as a source of long-term finance and ensure greater certainty for investors when dealing in cross-border transactions of securities and claims. This will help integrate EU capital markets further by facilitating cross-border operations and increasing legal certainty for companies.
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Source: European Commission
'No deal' Brexit could cost UK, EU companies 58 billion pounds: report
March 11, 2018--Companies in Britain and the European Union face an extra 58 billion pounds ($80 billion) in annual costs if there is a no-deal Brexit, with Britain's vast financial sector set to be the worst-hit industry, according to a report on Monday.
Firms across the EU's 27 countries other than Britain will have to pay 31 billion pounds a year in tariff and non-tariff barriers if Britain leaves the bloc without a deal, the report by Oliver Wyman management consultants and law firm Clifford Chance said.
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Source: Reuters
Fund managers count cost of Mifid research shake-up
March 10, 2018--Asset managers are setting aside tens of millions of dollars after agreeing to swallow the cost of paying for investment research following the introduction of wide.ranging European market rules this year.
The additional costs are hitting fund manager profit margins at the same time that they are coming...
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Source: FT.com
STOXX: STOXX monthly index news February 2018
March 9, 2018--Following 15 months of uninterrupted gains in global stocks, volatility made a comeback in February, whiplashing investors accustomed to a long stretch of solid and stable returns. The culprit was reportedly the sudden spike in US bond yields, which puts pressure on long-term financial results.
The STOXX(R) Global 1800 Index slumped in the month, as did benchmarks for all major regions. A decline in the euro helped cushion losses for European-based investors. The worst of the sell-off occurred in the month’s first week, with a later market rebound only paring some of the losses.
Amid the stress, low-volatility strategies resisted some of the decline, as should be expected. This included indices such as the STOXX(R) Global 1800 Minimum Variance Unconstrained Index.
It wasn’t all losses. The thematic STOXX(R) Global Artificial Intelligence and iSTOXX(R) FactSet Digitalisation indices were among a few that posted positive returns in the month. Furthermore, Europe pure factor premia gained over the time period, aided by the absence of systematic risk. This is reflected in the iSTOXX(R) Europe Factor Market Neutral indices.
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Source: STOXX
FinTech: Commission takes action for a more competitive and innovative financial market
March 8, 2018--The European Commission is today unveiling an Action Plan on how to harness the opportunities presented by technology-enabled innovation in financial services (FinTech).
Europe should become a global hub for FinTech, with EU businesses and investors able to make most of the advantages offered by the Single Market in this fast-moving sector. As a first major deliverable, the Commission is also putting forward new rules that will help crowdfunding platforms to grow across the EU's single market.
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Source: European Commission
Aberdeen Standard Investments expands smart-beta range with low volatility equity fund
March 8, 2018--Managed by quantitative investment strategy team
Aberdeen Standard Investments (ASI) has added to its SMARTER Beta fund range with the launch of the Smart Beta Low Volatility Global Equity Growth fund.
Listed in Luxembourg, the fund offers investors exposure to five factors: value; quality; momentum; low volatility and small size.
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Source: investmentweek.co.uk
State Street builds its European ETF business-quietly
March 7, 2018--Executive vice president and SPDR co-head Rory Tobin wants State Street Global Advisors' Europe ETFs business to rival its US ranking Rory Tobin, one of the main architects of BlackRock's successful European exchange traded funds business,
has spent far less time in the public eye promoting products to investors since he joined State Street Global Advisors, one of BlackRock’s main rivals.
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Source: fnlondon.com
Franklin Templeton hires ex-Invesco PowerShares UK distribution head to lead EMEA ETF sales
March 7, 2018--Joins from Invesco PowerShares
Franklin Templeton Investments has appointed Caroline Baron as head of ETF Sales-EMEA to generate and retain assets within the group's recently launched LibertyShares product suite.
The role is a new position for the region to actively support Franklin Templeton's global ETF rollout across Europe amid the launch of its LibertyShares range in Frankfurt and London respectively.
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Source: investmentweek.co.uk
Change in the Scale 30 index
March 7, 2018--On Wednesday, Deutsche Börse announced a regular change to its Scale 30 index. Due to the higher 12 months order book turnover the shares of Daldrup & Söhne AG will replace the shares of Ringmetall AG.
The change will become effective on 19 March 2018. The next scheduled index review for Deutsche Börse selection indices is 5 June 2018. The Scale 30 index tracks the performance of the 30 most liquid companies listed in the SME segment Scale. Eligibility for index inclusion depends on order book turnover on Xetra and Börse Frankfurt. Weighting of equities in the Scale 30 Index is based on market capitalisation and is adjusted quarterly.
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Source: Deutsche Börse Cash Market
