Passive Management Rules! No Wait, Active Management Rules!
Dec 15th, 2006 | Filed under: CAPM / Alpha TheoryThese two Bloomberg stories reveal the “twin” (and we argue, related) trends in the asset management industry…
ETFs Get $54 Billion This Year, Taking Share From Mutual Funds
By: Sree Vidya Bhaktavatsalam, Bloomberg
Published: December 6, 2006
This article suggests that ETFs are gaining at mutual funds’ expense.
“ETFs present a pretty serious rival to traditional mutual funds because so many traditional funds look terrible on a tax and expense-adjusted basis,” said Dan Culloton, an analyst at Chicago-based research firm Morningstar Inc.”
“ETFs pulled in 28 percent of all deposits in equity-oriented funds through October, compared with 24 percent in the year-earlier period…The growth has come at the expense of companies such as Fidelity and Legg Mason Inc. that have stuck primarily with actively managed mutual funds.”
Index-Fund Pioneer Bogle Sees Trouble in Paradise
By: Chet Currier, Bloomberg
Published: December 5, 2006
Conversely, this piece says that sophisticated investors have avoided ETFs and flocked to hedge funds. Reporting on a speech by Vanguard founder and index pioneer John Bogle, Bloomberg’s Chet Currier says:
“…with more than three decades of history behind it, indexing has taken, by Bogle’s own estimate, no more than a 7 percent share of assets in stock and bond mutual funds. These days many sophisticated investors, who by rights should make up indexing’s prime constituency, instead are flocking to the ultimate in active management, hedge funds. Defying the powerful argument for low-cost investing, hedge funds generally charge even higher fees than the typical actively managed mutual fund.”
Currier sums up the active/passive debate by suggesting that investors should have access to both:
“The choice of active or passive funds, conventional or exchange-traded, is wide open for each investor, big and small. May it ever be so.”
ETFs Get $54 Billion This Year, Taking Share From Mutual Funds
Index-Fund Pioneer Bogle Sees Trouble in Paradise
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Related Posts
- Passive Management: ETF “dark matter”
- Are Hedge Fund Fees a Bargain? And Other Conundrums of Balancing Active & Passive Management
- Measuring the True Cost of Active Management by Mutual Funds
- Note to Bloomberg: Chet Currier is a very smart man.
- Is “Active/Passive” another term for “Alpha/Beta”? Not quite.
