The launch of the first zero expense ratio index funds by Fidelity Investments in the US announced on 2 of August sparked controversy among investors and other professionals from the fund industry.
Head of fund selection at Millennium BCP’s wealth management unit in Portugal, Inés Correia (pictured), considers that any fee reduction is positive for end investors.
“Mifid II’s philosophy of transparency has been the biggest trigger for cost compression in fund’s management fees.
“The end of the rebates era and the imposition of transparency by Mifid II across the asset management industry has been the biggest push for fee reduction. I think it is very positive that instruments that do not require any active management do not charge management fees.”
However, Correia encourages investors to look beyond the zero-fee funds’ headlines, since management fees are not the only fees charged by index mutual funds and/or ETFs.
“Transactional and operational costs should be closely monitored and analysed alongside the way NAV are calculated.”
During her interview with InvestmentEurope, Correia also referred to Millenium’s exposure to emerging markets amid the recent lira crisis in Turkey.
Although Correia reckons that the latest events in Turkey could have some spill over effects over other EM countries – mainly on the FX side -, she confesses to have not changed her firm’s exposure to EM yet. However, the fund selector admits to be closely monitoring Turkey and other EM countries given the ongoing trade tensions and other geopolitical risks.
