Passive aggressive behaviour

There is now a new milestone in the history of dismal milestones in financial markets: as Bloomberg points out, the number of market indices now exceeds the number of US stocks. An earlier dismal milestone was passed years ago when the number of US stock funds outweighed the number of US stocks – a red flag raised by the actively managed fund industry. But this new red flag has been hoisted by providers of passive funds (including those active managers trying to have their cake and eat it too). The de facto spiritual leader of the mania for passive funds is Vanguard Group, which apparently attracted more inflows in 2016 than the rest of the US mutual fund industry put together. Don’t get us wrong – we like low fees as much as the next person. But the Gadarene flood into ETFs partly reflects flawed thinking: low cost is not the same as low risk, as a generation of cheapo investors buying stock markets at all-time highs may be about to find out.

Passive aggressive behaviour