Ritholtz: Passive Doesn’t Rule the World

“The hype about passive taking over the investing world is just that–hype.” This according to columnist Barry Ritholtz in a recent article for Bloomberg. “Active management in the U.S. trounces passive by a ratio of 8-to-1 in dollar investments,” writes Ritholtz, adding, “Expand that to include the entire world, and the ratio is closer to 15-to-1. If we include fixed income in our calculations the ratio balloons to 60-to-1.” The buzz about passive investing, he… Read More

Passive Have Surpassed Active Funds

In August, assets in U.S. index-based equity funds and ETFs topped those in active stock funds for the first time. This according to an article in Bloomberg. “Stock picking isn’t dead,” the article reports, “But the development marks the official end of money managers’ position as the guiding force in the American stocks market—and the seemingly inexorable rise of low-cost index-driven investing.” If the shift keeps gaining steam, it adds, the implications for both industry… Read More

Indexing Isn’t Active Management’s Problem

Today’s active managers can “no longer succeed by being very good, or even excellent. To succeed, they must be outstanding.” This according to an article in Morningstar. The article cites a recent paper by Vanguard showing that the active management industry has become crowded (as evidenced by a steady increase in candidates registered for CFA exams). “The question then becomes, what are all these trained investors doing,” the article queries, “when indexing has become so… Read More

Will Passive Investing Become an “Expensive Mistake?”

A recent article in Advisors Perspectives shares an interview with fund managers Matthew McLennan and Kimball Brooker, Jr. of First Eagle’s Global fund, which holds over $55 billion in assets. Here are some highlights: Regarding their investment philosophy, the managers say that they focus on two key criteria when evaluating purchase opportunities—price, and the durability of the company they’re looking at. The managers don’t have a strategic allocation to cash, but rather allow cash balances… Read More

The Active Money Manager Model No Longer Works

“Active money managers have underperformed benchmarks for far too long in one of the greatest bull markets in history,” according to a recent article in Bloomberg. As a result, the article reports, assets continue to flow toward passive investing strategies, “a shift that is shaking up markets in a not-necessarily-good way.” It adds that today’s top students are forgoing the financial services industry in favor of lucrative tech jobs, compared to 2006 when about 12… Read More

Mario Gabelli Isn’t Worried About the Passive Trend

During a recent interview with Institutional Investor, Gamco CEO Mario Gabelli shared insights about the current market environment. The article says that Gabelli “isn’t too worried about the trend toward passive investing that has robbed active-management firms like his of assets,” but believes a passive approach makes sense for long-term investors that “don’t have much knowledge.” Gabelli refers to himself as a “bottom-up stock picker,” the article says, and is currently interested in the “companion-pet”… Read More

Ritholtz & Kaissar on Passive Versus Active Management

 In a recent online debate concerning active vs. passive investing, Bloomberg columnist Nir Kaissar and Ritholtz Wealth Management’s Barry Ritholtz offered a range of arguments and insights. Here are some highlights: Cost and performance: While Ritholtz believes investors should allocate a “big chunk” of their portfolios to index investing because of lower costs and better performance, Kaissar argues that active (primarily for those focusing on value, quality and momentum) isn’t necessarily more expensive than passive.… Read More