A recent Bloomberg article describes the ongoing trend toward index investing as “one of the biggest shifts in corporate power in a generation,” citing the “Big Three” firms of BlackRock, Vanguard and State Street—who manage $7 trillion, $5.6 trillion and $2.9 trillion, respectively– as the most important players. Here are highlights from the article: The success of the “Big Three” has had “a weird and unintended consequence” whereby millions of investors—while making a sensible financial… Read More
In an article for Bloomberg, columnist Barry Ritholtz debates the claim that passive investors will bear the brunt of an equity slump. Specifically, Ritholtz refutes the argument presented by Times of London columnist Ian King citing the dot-com bubble-burst as evidence of “a salutary lesson to those who preach the virtues of index trackers in offering low-cost, low-risk exposure to the stock market.” Ritholtz characterizes the argument as a “bizarre anecdote, more along the lines… Read More
In a recent Wall Street Journal article, columnist Jason Zweig rebuts an argument that index fund expenses are drastically understated. The argument comes from veteran value investor David Winters, portfolio manager of Wintergreen Fund, who in his latest letter to shareholders says that the typical S&P 500 index fund incurred expenses of over 4.3% in 2016. Winters argues that index fund managers get away with “overpaying their bosses” more easily, as measured by shareholder votes… Read More
Jeff Vinik, who ran Fidelity’s famed Magellan Fund from 1992 until before he left the firm in 1996, became well known for his aggressive investing style, according to a recent Barron’s article. A huge sports fan, in 2010 he left the money management business, bought the Tampa Bay Lightning (a then floundering hockey team) and has undertaken a $3 billion revitalization of downtown Tampa. Here are some highlights from the Barron’s interview: “Stocks are fine… Read More
By Jack M. Forehand — The massive move investors have made to passive vehicles over the past few years has been truly astounding. With most active managers underperforming their benchmarks by a wide margin recently and over longer periods of time, and charging higher fees to do it, investors have been moving their money out of active and into passive in droves. A CNBC article in April sums up the magnitude of the move: “Flows… Read More
Last month marked the fortieth birthday of the first index fund (launched by John Bogle, founder of the Vanguard Group) and the anniversary has triggered a lot of discussion and reflection on the trajectory this class of funds has traveled since. Jason Zweig of the Wall Street Journal shares some thoughts on the subject and how the phrase “too much of a good thing” could apply. Zweig reports that over the past year $409 billion… Read More
“The index provider is becoming more of a stock picker,” said Rodney Comegys, head of investments for Asia Pacific at Vanguard Group (which oversees more than $3 trillion in primarily passive funds). “In some ways,” he says, “they’re replacing the active manager.” In a WealthManagement.com article from earlier this month, Bloomberg’s Andrea Tan delved into the surging presence of index funds. The article characterizes New York-based index compiler MSCI and others (including FTSE Russell and… Read More
Bloomberg reports on a recent study by S&P Dow Jones Indices that found most active managers underperformed the relevant S&P benchmarks. Specifically, 66% of large-cap, 57% of mid-cap, and 72% of small-cap managers underperformed the S&P benchmarks for their categories last year. Further, over five years, 84% of large-cap managers underperformed, while 82% underperformed over the last 10 years. However, a majority of actively managed funds investing in international and developed markets outperformed their benchmarks.… Read More
The New Yorker reports on concerns that the growth of index funds may distort the market. Since Jack Bogle introduced the first indexed mutual fund in 1975, their low fees and promise of delivering the market’s outperformance over other investment options over the long term has led to widespread adoption of the strategy. The article notes that “as many as twenty per cent of stocks are now owned by index funds,” and “when you factor… Read More
A Wall Street Journal blog post by Jason Zweig profiles “superstocks” and suggests they provide a “reason why, for most people, index funds make superior sense.” Zweig notes that 44 U.S. stocks have generated cumulative returns of 10,000% or more over the last 30 years, and borrows the term “superstock” from William Bernstein of Efficient Frontier Advisors to describe stocks that grew at least twice the rate of the S&P 500. David Salem of Windhorse… Read More
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