Euro size
LIVE MARKETS-Is zero-fee fund management the future?
LONDON, Aug 28 (Reuters) - Welcome to the home for real-time coverage of European equity
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Developments over the summer in the asset management industry have shown the obsession over
Fidelity announced equity index mutual funds with zero fee, JP Morgan is
offering free trading on its retail platform, and Invesco (Frankfurt:
So if zero-fee fund management is indeed the future, what does it imply? Euro Chart Size
It "increases the focus on what kind of return streams can command a fee, and changes the
way investors think about benchmarks and goals", Bernstein's quantitative team says.
Charging for market "beta" and factor "beta" (i.e. gains that derive from market-wide moves)
is not going to be possible anymore, they add. "We think this sharpens the focus on
idiosyncratic returns as the proper target by which individual fund managers are assessed."
Bernstein has this pretty impressive chart showing that, for both passive and active funds,
the cheapest 20 percent attract ALL the flows. This highlights the pressure on the industry in
which asset managers need massive scale and technology in order to turn a profit:
U.S. stocks have broken new highs and - despite thin liquidity - recent volatility in Turkey
and EM appears to have had little lasting impact on markets.
"Cross-asset volatility has generally been anchored in the summer," say Goldman Sachs (NYSE:
The only areas where volatility has been rising are in EM FX - where vol is currently above
levels reached in the 2013 "taper tantrum" - and copper, as well as sterling. You can see in GS'
volatility map below that EM currencies and sterling have started to creep more into the orange
But volatility could start creeping back into markets in the autumn, with a plethora of
catalysts including China trade tensions, EM worries, U.S. midterm elections, Italy, and Brexit.
Despite all these potential landmines for stock markets, GS reckons "A high vol regime
remains unlikely until the macro data turns worse."
Overall GS is pro-risk with overweights in equities and commodities, underweight in bonds
and neutral credit - but they maintain an overweight in cash too.
) investors looking ahead to a "back-to-school" period littered with risks, UBS
economists have provided a timeline and scenarios for one of the biggest challenges on their
"There continues to be high uncertainty about the size and composition of Italy's draft
What we do know, however, is that the budget plans will be released by Sep (Shanghai:
government's Stability Programme update, and in the draft budgetary plan to be sent to Brussels
Based on that draft, the European Commission will prepare an opinion by Nov 30, and, if it
detects serious non-compliance, can ask Italy for a revised budget. Italy doesn't have to take
that into account when adopting its budget by Dec (Shanghai:
procedure if the deficit breaches, or is forecast to breach, the 3 percent limit.
The reason for investors' nerves? The new government's policy initiatives imply between 4.5
percent and 7 percent of GDP of additional spending, by UBS (LSE:
UBS sees four possible scenarios, with 2 and 3 more likely than 1 and 4:
* a projected 2019 budget deficit well below the 3 percent limit, without implementing key
* deficit stays below 3 percent but with key spending measures at least partially
* proposed deficit stays below 3 percent for 2019 but only because key spending such as the
tax are shifted into later years - potentially implying bigger deficits for 2020 and beyond
* all proposed measures implemented in full in 2019 with a deficit well above the 3 percent
triggering severe push-back from the European Commission
Here's a reminder of the risk premium baked into Italian assets, weighing down the FTSE MIB:
The only areas not being lifted in the rally today are Spain and Italy. The FTSE MIB is down
1.1 percent while the IBEX falls 0.5 percent, with financials the biggest weight on both
Italian stocks were the worst-performing yesterday too with investors telling us attention
is now turning to the challenge of the Italian budget which has to be thrashed out in September.
Sentix's euro zone break-up index rose in August, reflecting increased concerns about Italy
and Brexit. You can see below the euro zone index (in blue) and Italian index (in red).
"The behaviour of the Italian government in the refugee crisis also gives investors cause
for concern," writes Manfred Huebner, managing director at Sentix, noting Italy's likelihood of
leaving is still the highest of the euro countries in the Sentix survey.
There is still some steam in the trade rally which lifted world markets after the United (Shenzhen:
The STOXX 600 is up 0.3 percent with strong gains in car makers and miners while in London
the FTSE is catching up with a 0.6 percent rise, after a summer bank holiday.
A few strong individual moves with Danish brewer Royal Unibrew (LSE:
European stocks are set to extend yesterday's gains with futures trading flat to 0.6 percent
higher as investors cheer the NAFTA deal between the U.S. and Mexico. Hopefully we'll also see
an improvement in volumes as traders in London return from the long weekend.
It's sparse in terms of company news though British business supplies distributor Bunzl
reported a 3.9 percent rise in first-half profit, thanks to gains from recent acquisitions. The
company also revealed its first Norwegian acquisition, of a catering equipment supplier.
Premarket indications see the stock gaining 1 to 2 percent.
On the deals front, Swedish compressor and vacuum pump maker Atlas Copco (LSE:
cryogenics business from Brooks Automation (Frankfurt:
Here's a round-up of key European company headlines:
Atlas Copco to buy cryogenics business from Brooks in $675 million deal
) to sell Letica's food-packaging business for $95 mln
Equinor explores floating wind turbines to power N.Sea oilfields
Swiss cartel watchdog declines to probe watchmakers over spare parts
UK professional services firms' mood lowest since Nov 2016 - CBI
European stocks futures have opened broadly higher but the gains are fairly timid as
investors continue to watch whether there will be any further developments with the NAFTA deal
"Trade tensions have been hanging over equity markets, and this is certainly a step in the
right direction," David Madden, market analyst at CMC Markets UK, said, referring to Monday's
Likewise there still hasn't really been much progress on the U.S.-China trade front, which
MORNING CALL: EUROPEAN SHARES SEEN OPENING HIGHER (0535 GMT)
Good morning. European stocks are expected to open higher, according to financial
spreadbetters, as investors cheer the deal between the United States and Mexico and traders in
On Monday the U.S. and Mexico agreed to overhaul the North American Free Trade Agreement
(NAFTA), which boosted shares in European autos in the previous session.
) indexes both hit record levels, while Asian stocks were also broadly
Spreadbetters saw Britain's FTSE 100 up 0.5 percent, Germany's DAX 0.2 percent higher and
(Reporting by Danilo Masoni, Helen Reid, Kit Rees and Julien Ponthus)
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