Funds spat turns political in Sweden
Peter Norman, Sweden’s minister for Financial Markets, has rebutted complaints from active fund managers about the effects of high frequency traders, a month after berating the domestic funds industry for not publishing details of how fees may reduce investor returns over time.
Norman’s view is that there are some players in the funds market who are blaming high frequency trading (HFT) because they lose the ability to earn easy money. The statement came during Swedish parliamentary proceedings focused on financial stability.
According to daily Dagens Industri, Norman’s view garnered some support from Martin Andersson, director general of Finansinspektionen (FI), the Swedish Financial Surpervisory Authority, who said that it was not totally clear that HFT leads to less stability in financial markets. There is a risk that measures are adopted against HFT that could actually make the situation worse, according to Andersson.
However, their views seem to contradict the gist of the proposals put forward by Internal Markets and Services commissioner Michel Barnier, who said in October that regulation of HFT should be handled within the upgraded Market Abuse Directive (MAD).
Sweden’s FI started its own investigation into HFT in October this year, following complaints from active fund managers concerned about the effects HFT could have on daily unit pricing as well as liquidity.
The (political) trend is not your friend
Norman’s view that some of the criticism of HFT may simply be a smokescreen for poorly performing active management comes about a month after he took the domestic mutual funds industry to taks for not publishing more data about the effects of fees on investor returns over time.
Avanza, one of the bigger independent distributors of funds in the market, has noted that Norman wants fund manufacturers to insert this type of information into their fund factsheets.
“I don’t think consumers understand just how high these fund fees actually are,” he is quoted as saying at the time.
Avanza writes that in response the Swedish Investment Fund Association’s chief executive Pia Nilsson has responded by stating that the industry will not bow to politically motivated requests for such information.
“Accounting for the [future] fees of every fund over the long term is a highly theoretical activity that I think few investors would benefit from,” Avanza quotes her.