Why big finance is so hostile to Robin Hood
Now that a financial transactions tax is almost certain to be introduced at some level in Europe, the chorus of opposition from within the finance industry is becoming more shrill and more frequent. Lavish research reports spell out the doom that will follow implementation of an FTT. But this is nothing more than special pleading by those who work in the transactions industry.
It’s not just the impact an FTT would have on their bonus income they’re worried about, though. As the increased focus of attention shone on the practices of the hedge fund industry by Mitt Romney’s stumbling campaign for the US Republican presidential nomination demonstrates, hedge fund managers have been making a mint out of management fees as well as the growth in the funds they manage: and it’s that management fee income that they are desperate to protect from a Robin Hood Tax.
This explains much of what hedge fund – and pension fund – managers have been saying about the impact of a Robin Hood Tax on pensions. Their working assumption is that current processes MUST NOT change. That pension funds will continue to pay high fees to the middle men (gender assignment not unintentional) every time they shift pension fund holdings around.
But there is little evidence, as Financial Times research reported today shows, that this constant recycling of fund holdings (whether the owners an individual or a pension fund) benefits the owners or the managers. Fund managers are also desperate not to take the hit on each individual management fee the charge for carrying out a transaction, and their assumption is that all the revenue raised by an FTT will be passed on to their clients.
An FTT would force fund owners, collective as well as individual, to re-examine the model that they are following. And it’s the model that fund managers are desperate to retain. But it’s not in the interests of us as pension fund members, and if an FTT was implemented without changing that model or at least sharing the tax payments, that would be exposed.