Finance: Economists criticize Sweden funds in Dagens Nyheter (Continued)
2014-12-08 12:01
(SIX) Economists Harry Flam and Roine Vestman addressed in a Posts in Dagens Nyheter on criticism of the so-called Sweden funds as they deem do not justify their charges. "Our advice is that investors who want to invest in the Stockholm Stock Exchange should choose an index fund instead of a Sweden fund. Index funds have roughly the same gross yield Sweden funds, but they have lower management costs, as they do not try to choose listed companies, "wrote economists. They urge fund industry to voluntarily tighten its Consumer information about Sweden funds, and argues that Funds should be provided with a standardized product declaration. "Based on our results, one may ask whether the fund management companies activities should be regulated harder to stimulate the flow of actively managed Sweden funds to index funds, "argues Harry Flam and Roine Vestman. According to the researchers, it would not only result in a reduced cost for unitholders, but also an economic gain. "The resources that fund managers spend on trying to select listed and beat the stock market constitutes an economic cost not matched by an economic benefit, as they actively managed funds have roughly the same return as the stock market, "writes the. SIX News debaters ask if they know of any research or if they have any discretion as to whether there are any other economic consequences of a transition from actively managed funds, index funds in terms of capital allocation in the economy. Who will, for example, determine which companies should be on the stock exchange and access to capital that path in that case? Are there any risks of letting index funds manage that kind of decision? Could it be that index funds certainly capable of "free ride" on a well-functioning stock exchange, but the exchange's function would be impaired if active management declin ed? "The reasoning is based, as I said that it is not an average of creation any value for the investor right now while there is cost-effective way to achieve the same return, "answers Roine Vestman. There is of course a value in maintaining an effective market, notes economist. "Personally I think however that it is wrong to add the cost of this on small savers, for several reasons, "he says. "It is clear that active investors are needed, probably also active fund managers. But the division between index management and active management in Sweden right now does not seem to be optimal, neither for Index saver or for those who really want to invest in actively managed funds. If the index management increased, it would probably be easier for active managers to beat the stock market, "says Roine Vestman. "I think our advice to the average investor stands also when considering the argument of market e fficiency, "said he concludes. Economics Professor Harry Flam think that the questions are legitimate, but emphasizes that mutual funds do not account for all capital on the stock exchange. "Of course it would be great if all the capital in the stock market came from index funds. In reality, over 10 percent of fund assets on the stock from index funds and less than 10 percent of the total market capitalization comes from Sweden funds, "he says to SIX News. "Stock prices would probably contain as much information even if all funds were index funds. Research on US data says that the emergence of mutual funds has added more information compared with the situation in the 60s, "continued Harry Flam. Johan Lind +46 8586164 48 mailto: johan.lind@six-group.se www.blogg.six.seSIXNews SIX News
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