(New York)

Despite the rise of ETFs over the last few years and the weak performance of hedge funds, on average, one of the astounding things in asset management has been the staying power of the latter. Hedge funds long had a “2% and 20%” fee structure as standard, and while most discount a bit from there nowadays, fees are still very high—hundreds of times low-priced ETFs and mutual funds. Bloomberg explains that a big part of that fee goes into paying the brokers that recommend the funds. The payments go by all sorts of names, such as placement fees, payment for shelf space, and retrocessions, but the fact is they boost costs to investors.

FINSUM: Bloomberg tries to make this look dirty, but the reality is that referral fees are standard in many industries. The big question in this area is where this type of arrangement falls when the SEC debuts its new fiduciary rule?

(New York)

Many investors are constantly on the look out for the next bubble. Well there is a new one right before their eyes, but many are not seeing it. Leave stocks and bitcoin aside for a moment, and look at private equity. Many say the current market is just like the Dotcom bubble, with valuations way too high and way too much optimism on growth and business models. “It is quite amazing that there is no collective memory that goes beyond five years” say an Oxford professor. Part of the problem is that fundraising has been really strong, which has led to more money flowing into companies, pushing up multiples. The other is the broad availability of debt funding for buyouts, with one industry specialist saying “These are unashamedly incredibly attractive conditions to borrow money. Will that debt be available to buyers in five years’ time? Probably not. Buyout groups are bullish to take the risk in 2018. It’s a ’risk-on’ environment”.

FINSUM: Aside from the reasons cited, the valuation of the stock market is another factor that is pushing up valuations. The sector looks likely to have a reckoning.

(New York)

Call it a “silent killer”, but there is a big threat coming to US malls that many don’t see coming. While the big bout of retail bankruptcies in 2017 hit the industry hard, a less headline-grabbing, but more widespread issue might cause bigger issues in 2018. That issue is that smaller mall tenants are likely to simply not renew their leases. Smaller operators between the big anchor stores actually generate more revenue for malls, and a decrease in tenancy would be a big blow to mall revenue. Smaller operators are actually better indicators of retail health because their lease terms keep them on the lookout for greener pastures.

FINSUM: Mall REITs could be in for a rough time here. While little companies won’t get much press, this pending increase in vacancy rates could hit malls hard.