Fund competition at the zero-fee bound

UNIVERSITY OF TECHNOLOGY SYDNEY
Finance Department
Research Seminars in Finance

Topic: Fund competition at the zero-fee bound

Speaker: Marius-Andrei Zoican, University of Toronto

Abstract: Security lending frictions transfer informational rents from short-sellers to asset management funds and investors, who may receive dividends or fee discounts. While state-contingent dividends correlate with shorting demand and provide a natural hedge, fee discounts do not. Ex-ante fee discounts are optimal only if funds can funnel revenues ex-post. Therefore, zero-fee contracts reflect moral hazard. Generally, technology-led drops in fund expenses improve stock market participation. The relationship breaks down for zero-fee opaque funds, as asset managers capture the full returns to technology. To reduce funnelling of lending revenues, costs needs to decrease beyond the point where zero fees become sustainable.

Date: Wednesday, 30 October 2019
Time: 12.00 – 1.00 p.m.
Venue: University of Technology, Sydney
               Building 8, Room 08.002, Dr Chau Chak Wing Building
               Dr Chau Chak Wing Building
              14 - 28 Ultimo Road, Ultimo

Co-ordinator: Claire Liu  (Ph: +61 2 9514 7748)

Enquiries: Mala Kapahi (Ph: +61 2 9514 7777)

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Acknowledgement of Country

UTS acknowledges the Gadigal people of the Eora Nation, the Boorooberongal people of the Dharug Nation, the Bidiagal people and the Gamaygal people, upon whose ancestral lands our university stands. We would also like to pay respect to the Elders both past and present, acknowledging them as the traditional custodians of knowledge for these lands.