Active and Passive Investors: Which Perform Better?

Morningstar’s director of global ETF research, Ben Johnson, recently shared research regarding the relative performance of active and passive investors with Christine Benz. Morningstar’s data on domestic equity cash flow-weighted returns for index fund versus active investors, says Benz, “makes index fund investors look pretty smart. According to Johnson, the research shows that index fund performance has a lower “return gap”—the difference between time-weighted and cash flow-weighted returns. That is, index investors set expectations for… Read More

Morningstar’s Ben Johnson on Multifactor ETFs

Factor investing is to portfolio construction what macronutrients are to the diet, and diversifying a portfolio to include various factors is as important as doing so with asset classes in a traditional, market-cap weighted portfolio. This is the upshot of a recent Morningstar interview with Ben Johnson, the firm’s director of global exchange-traded fund research. Johnson (who credits the macronutrient analogy to factor expert Andrew Ang of BlackRock) discusses the philosophy behind an investor’s move… Read More

The Passive Investing Tsunami in ETFs Continues

Investments have been shifting from actively managed funds to passively managed exchange-traded funds (ETFs) for a while now, but the Brexit vote and impending U.S. presidential election have fueled the migration even more. According to a recent CNBC article, the month of May saw an $18.7 billion exodus from actively managed U.S. equity funds and an $8.1 billion inflow to passively managed, index-tracking funds, primarily ETFs (data from Morningstar). Ben Johnson, global director of EFT… Read More