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Top selector: why we decided to absorb MiFID II costs

Top selector: why we decided to absorb MiFID II costs

The fund industry is fixating on fees and financial authorities need to make sure investors know what is expected from country-to-country.

Speaking to Citywire Selector, Banco Poplar’s Paulo Gonçalves said his firm had decided to absorb costs but benefits from an active market body which has helped explain where payments are expected.

‘Fees don’t really affect us that much, as they are already transferred for the funds and not for us. We are more on the asset management side and cannot retain the fees, so I don’t think that will have much of an impact,’ he told Citywire Selector.

Looking at regional differences, Gonçalves said the regulation won’t actually be that much of a problem for the Iberian market.

'In Portugal, the CMVM (the Portuguese securities market commission) has told us that for funds we can receive research, so we don’t need to input the cost.

'It will be more difficult for private banking and discretionary portfolio management where we have to reduce the amount of research that is used if we choose to input the cost to the client.

'Right now it’s totally free, but if we use them too much and put that cost onto the clients, then it won’t be very good for them,' he added.

Passives

Elsewhere, Gonçalves said he is a big supporter of active management, but admitted it can be a struggle to select active strategies in some areas of the market.

'Admittedly, it is a struggle in places like the US to find good managers, but, if you are with the correct managers then they add value in comparison to passive investments.

'We use passives but in a small capacity, it’s mostly for trading in some moments for our short-term changes for asset allocations. For example, when we have not yet selected the active fund that we want to be in for the medium to long-term.'

Gonçalves said the popularity of passives will be largely dependent on an imminent correction. 'There will be a correction, I’m not sure in which year, it could be 2019/2020.

'When we have the next recession all of these flows of money for the same stocks will have a negative impact on the performance of ETFs versus the active funds and I think that will be the crucial market of truth for most passive investments,’ he added.

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