I kind of get the sense that perhaps some people are upvoting this article because of the title and they just agree with the sentiment. Which is fine but I don't really think this article is saying anything new here.
Actively managed mutual funds are going away fast and that's to everyone's benefit. Some were charging 2% yearly plus a fee when you bought or when you sold( redemption fees). I can't think of a single reason that anyone should have any money in an actively managed mutual fund.
If there is a continuum of hedge funds to ETF's, actively managed mutual funds are literary the worst of both worlds. High fees and low ability to make returns.
From where I sit, the biggest jobs that are in danger are sales jobs. There used to be teams of people at mutual fund companies whose sole job was to sell their products to Investment advisers at brokerages with the hopes that the advisor would put their clients money into these funds.
As someone who is on the side of actively managing money, I see this as a strong positive. The more passive money there is sloshing around the more arb opportunities there are!
There are a huge, huge number of people that have 401ks and IRAs that only offer a small number of actively managed mutual funds, many of which have high fees, and there is little consumer education about the high of these fees. If this rule change leads more 401ks to offer ETFs and some education about there value, it will make a big difference.
> I can't think of a single reason that anyone should have any money in an actively managed mutual fund.
I kinda agree with you. However, theoretically, I would have been more than happy to put my money in an actively managed fund IF that fund was managed by someone with a very high intelligence and who was able to sit still. By sitting still, I mean not buying and selling all the time. Often, it's far more profitable to sit on shares for many years, rather than buy and sell all the time. But I guess those fund managers are expected to come into some office every day at least from 9 to 5, regardless of whether there is anything to do. Also, they probably have co-workers and bosses who ask them what they're doing. Maybe it would be kinda boring to answer "nothing" every day for like 2 years in a row.
ETF have one big problem, you end up with a critical mass of investors who all apply the same know rule based investment strategy. That means that they will be arbitraged by hedge funds (like when a stock is expected to enter the S&P, you know there is a huge mass of dumb buyers who will buy it then whatever the price). And you are creating potentially liquidity issues. You need people with various trading strategies for the market to remain liquid.
I am not against ETF, in fact that's what I would use, but it comes with its own problems.
"As someone who is on the side of actively managing money, I see this as a strong positive. The more passive money there is sloshing around the more arb opportunities there are!"
In the medium term active and passive management will eventually reach equilibrium. Passive funds cannot perform price discovery as well and rely on active funds to do this. However the ability of computers to discover prices will eventually exceed that of humans not possessing insider knowledge. My money is, literally, with the computers.
> I can't think of a single reason that anyone should have any money in an actively managed mutual fund.
It will depend on your bank, but anecdotally it seems commission free mutual funds are more common than commission free ETFs. If you are the type who wants to invest X% of every paycheck (i.e. making multiple trades a month), are only investing a small amount of money, or are only investing for the short to medium term, you are likely better off with the the higher fee and lower commission. Retirement savings tend to be none of those three categories, so ETFs are almost universally better in that regard.
Generally I agree with you. However I can provide a personal counter-example. I am a student with a modest sum saved away (with great help from my parents) in an index tracking mutual fund. Due to the way my bank offers investment packages, I am far below the minimum portfolio balance required for significantly less fees. However, I can have a mutual fund in a different type of account offering which is essentially the same as an identical ETF.
This is (Canadian) RBC - Direct Investing.
In addition this particular fund also significantly outperformed other ETFs during 2008-09.
Is the statement "more passive money implies more arbitrage opportunities" actually true?
1. I think passive money is generally not taking any position on whether an asset is over or under priced, and as a class tends to be very inactive. I doubt it either increases or decreases arb that much.
2. I think what would increase arb opportunities would be:
A. A critical mass of misinformed active managers
B. So few active managers that the market is gameable
However, as the number of active managers decreases, one would think that the misinformed ones would go first (A), and that (B) won't be a linear progression, but a sudden tipping point at a very low level of active management.
Actually, I sort of think the final statement is reversed. As the number of active managers declines, and the average active manager becomes more competent, it will become harder for the active managers to find profitable arbitrage opportunities.
Why are actively managed funds paid via fees, and not based on performance?
If someone (or some company) is claiming to be better than me at using my money to make money, surely they'd agree to put skin in the game, and only profit when I do?
If they don't feel confident enough about their choices making money (and hence, ensuring they get compensated), why should I?
edit: I was referring to the types of funds typical retail investors are in, not hedge funds.
> If someone (or some company) is claiming to be better than me at using my money to make money, surely they'd agree to put skin in the game, and only profit when I do?
Imagine you believe that mail order companies are poised for rapid growth in coming years. You don't know which ones specifically, and there are thousands. So you buy a mutual fund which holds hundreds of these companies. This gives you some diversification and lets you make your bet with only a single commission to buy and sell.
But the fund manager may disagree with your investment thesis. She may be fully convinced that online shopping has already destroyed the mail order business permanently. She would therefore gladly run a fund for you, but she would not bet on its performance herself.
For a somewhat more real-life example of this, watch or read "The Big Short." The protagonist wants to buy something that the banks think will lose money.
> Why are actively managed funds paid via fees, and not based on performance?
Pay for performance creates an incentive for outsize risks. Sure, our Subprime Mortgages Fund and Greek Bond Opportunities Fund were down this year, but Powerball Tickets Fund and Vegas Bet Everything On Red Fund more than covered those losses.
If you're a risk-averse investor, your most likely match is some variant of slow-growth, growth-at-reasonable-rate or dividend-reinvestment strategy. Paying for assets under management motivates the advisor to at least not lose all your money and keep you as a client.
This is why I don't invest in actively managed funds.
I like the argument that if anyone could pick stocks better than average, they'd end owning everything - but I don't pretend to understand the share market well enough to be confident investing everything according to that.
But if the very people who know most about the share market charge fixed fees, this seems to me to be an implicit recognition that they can't out-perform the market in any meaningful way. I once engaged a broker in an argument about this, and they ended up admitting that the only value they added was managing the whole shares-bonds-cash mix for people who couldn't or didn't want to do it for themselves.
And back to the point of the article, automating that management would not be difficult. I agree that there are hard times ahead for most brokers.
Because drawdowns are inevitable and investment companies need operating capital even in (particularly in) down markets.
If they were paid solely based on performance then you would also pay points on the spread between what you lost vs. what some benchmark lost that year. I can't imagine many investors wanting to take on that kind of risk.
"Why are actively managed funds paid via fees, and not based on performance?"
Simple, As Warren Buffet said when he created an investment firm, he expected to be judged over the general market wave, that is if the market crashes 75%(like in 2008 or the great depression) just maintaining the funds worth(or loosing small) is a great deal and you are a genius. If the market skyrockets 50% per year and you get 10%, you are not so good.
Putting it another way, they are already based on performance over the market.
>Here's a cautionary tale. A broker sends you 10 free stockmarket predictions in a row that all come true, and then asks for money for an 11th. The stockbroker's offer seems reasonable enough. His strike rate is 10 out of 10, so surely he will be right the next time, too? Don't do it! If you pay for the 11th tip, you will have fallen victim to the oldest scam in the book. Unknown to you, the stockbroker has been sending every combination of possible predictions to tens of thousands of other people, and you are one of the unlucky few who got 10 good ones in a row.
>Imagine you are considering investing in a mutual fund. Before funds are opened up to the public, they are often monitored in-house. Funds that don't perform well can be shut down, without the public ever knowing. Ellenberg warns that if you are seduced by funds with an eye-popping rate of return, then you are walking into the Baltimore stockbroker's trap: "You've been swayed by the impressive results, but you don't know how many chances the broker had to get those results."
I read that it is fairly easy to guess which companies will move in and out of S&P 500 and similar indexes, and since a larger and larger part of the market now sits in passive funds it is easy to predict large movements in buy and sell around when these indexes are updated.
So that should definitely open up some opportunities to beat the passive funds.
Not really, the big index fund providers are smart and they even pre emptively buy companies likely to be added to the index, and they sometimes wait a bit before rebalancing to their index. This intentional randomness makes it very difficult to front run index funds.
I am not very cheerful about the markets being "-largely driven by passive investors. Traditional investors play a pivotal role in corporate governance and strategy, and reward management with a track record. Unfortunately the flows are becoming more and more driven by passive strategies, and this can potentially lead to negative externalities in the economy [1].
I don't think that you have any reason to worry. Once everybody is using index funds, there will be plenty of opportunities for actively managed profits, and people will begin to take advantage of it again.
I think another side effect of this is increasing the long bias markets already have. I could definitely see being short the market becoming a very dangerous proposition. Price discovery is a lot more difficult when it becomes costly to short things and I can only see this leading to greater volatility and heightened market crashes. Related to corporate governance, Chanos [1] shows the importance of short selling through Enron.
Article you linked to is about passive investing in commodities pushing commodities prices up. I agree this is a negative externality. But we're discussing passive investing in equities pushing equities prices up, which have positive externalities in the economy. This is good.
Diversification is good for individual investors, but it's also a good way for an economy, or for a financial sector to hedge against systemic risks.
So if ETFs are taking over, it may be an improvement overall, but it's worth thinking through the black swans, the new low probability high impact risks that this creates.
Bloomberg has had a few comments about liquidity risks for ETFs on their site and in the Odd Lots podcast.[0] On the other hand, they've made these comments for a few years now, so maybe this is a chicken little story. Or maybe it only kicks in under certain conditions, like if we saw interest rates, demand for goods, and inflation spike, people start moving to other investments, potentially causing a sudden run on funds that are stuck holding only bonds without any real returns or way to offload them?
I think this is pretty naive. Customers (generally large institutional investors) don't choose active managers because those managers provide superior returns. They choose them for the same reason that people choose big consulting firms like BCG or McKinsey: status and affiliation, nepotism, internal power struggles, and cover-your-ass blame insurance.
I mentioned in a previous thread about this -- I worked for several years in an asset management firm before moving on to other things. We frequently assisted clients in the process of firing us. We would prepare white papers for them, give them data and slick charts. Sometimes this would literally disrupt the quants and research team and we had to join in creating materials that would be used by client board members in their presentation of the decision to fire us. Sometimes we even had to provide examples of this kind of work when a client was hiring us -- our helpfulness and data services during the times when we are fired was actually a prominent selling point. We were basically saying, hire us now and you get to look fancy. Fire us later and we'll set you up to look principled and full of conviction to do the right thing as a sophisticated board member.
There are all kinds of laws restricting gifts you can give to clients or receive from clients, and just as many stories about how such-and-such a client took some regional sales manager out to a strip club, or flew them some place and got them a reservation at some exclusive restaurant or something.
It's all political. As a technical person, you are hired to look fancy on paper. I remember overhearing my boss bragging to a prospective client that the team had an "Ivy League graduate" leading up their quantitative software development ... on my second day of work! I had zero financial experience of any kind at the time. It was ludicrous.
It's painful to see everyone buying into this. I hope beyond all hope that clients do a better job of actually holding firms responsible for returns. Firms that don't engage in legitimate statistical research to determine an edge in investing will fold up, and firms that actually have a chance at superior returns might actually start letting their staff do real research work instead of bullshit marketing and catering to client political whims.
But that's a fairy tale world. This will all blow over and clients will continue dedicating huge blocks of their endowments or retirement funds to active managers for political reasons and will continue happily not holding those managers accountable for inferior returns.
> They choose them for the same reason that people choose big consulting firms like BCG or McKinsey: status and affiliation, nepotism, internal power struggles, and cover-your-ass blame insurance.
There must be some lean way to exploit that.
In theory, you could manufacture status for your consulting firm. (So that's why BCG and McKinsey plaster German universities with their ads.)
i understand what is being said here. i don't think it is revelatory.
on the other hand this article just adds another small contribution to my strong distaste for the practices of the financial industry overall.
investing money into funds to make more money seems great at first glance, but once you dig into the details and realise the number of people involved taking their cut, how many companies are effectively running off of weird loans through 'ownership', and how many piles of assets are owned by people as a mechanism to make more money... its all very distasteful to me. :(
then again, i don't like investment. i don't want it for my own company. it looks like a way to become beholden to others and introduce a risk of spending more money than you actually have.
Where there is a buck to be made, someone will make it. All this talk of index funds ruining capitalism just sounds like a bunch of whiny fund managers not getting their cut.
This is actually the opposite because ETFs and index funds increase stock correlation and the more correlation among stocks the less hedge you can find. If all stocks moved exactly with the S&P500, you would not make any money.
I wonder if there's an opportunity for someone to come along and undercut the passively managed ETFs and index funds? 0.10% is still a lot of money when you're managing billions or trillions; is there any reason someone couldn't come along and provide the same service for a 0.01% or 0.001% fee?
Vanguard is the "credit union" of index funds - it's owned by the funds themselves rather than making a profit for some third party. Vanguard has lowered their fees on several occasions as their funds got bigger, and they manage a ridiculous amount of money, so I imagine they'd be very hard to undercut.
This seems implausible. A 0.01% fee on a $1bn fund equates to $100,000. This isn't enough to pay a single full-time employee, not to mention to actually conduct trades, perform accounting, and deal with legal/tax considerations.
As a member of financial industry, I wouldn't say that.
"Active" brokerages are biting the dust? Well, good riddance! Moving people out of the loop is generally a good idea.
Now, passively managed funds are a good thing, during the growth market. However, once around every ten years, a recession comes. Then, suddenly, index-tracking funds become passé, and everyone wants a strategy to survive the market downfall.
And we have a lot of things to bring in from the current tech state of the art. Blockchain is ingenious, and the art of defining modern financial instruments using blockchain features is in its infancy. So, there is a lot of work to do, and lot of potential to grow.
Whats really happening is the the really big players are now extracting wealth from the middle ones. For the American people, this means the middle class gets destroyed, but the key here is that lots of people that are technically "middle class", are really in the top lowerhalf of the 1%, but many of them don't realize the wave to come.
So once even the 200k/year lawyer down the street is suddenly homeless because he actually had negative net worth, then it will be too late, but the real point is that there is no more money to be extracted from the lower classes except by death by a thousand cuts (taxes), so all the middle men hedge funders etc are going to be mergered and acquisitioned away as the banks learn how to manipulate the blockchain market and take it over just like they have everthing else.
Digitalization of the financial industry is just the buzzword scapegoat they are going to use to get it done. The same way in which, you see the former director of NSA leaving and joining a bank, and then yelling doom and gloom about hackers zeroing out accounts. All that tells me is that is what they have already planned.
I can see the headline now: "Hacker breach $BANKS, transfer $BILLIONS. Another bailout unavoidable to prevent collapse."
I've said it before, and I'll say it again, the elite oligarchical international bankers are closer to terrorists than businessmen.
I have a strong feeling that the contents of the index (or at least weights) can still be manipulated. And also that the fees are just moving down the food chain somehow.
If you think I'm wrong, just consider that a public company can own stock in another public company.
This will all become more obvious when "passive funds" take over more of the market.
Sorry but what's the difference between ETFs and index funds? It was presented to me as the same thing just one word being more common in Europe and the other more common in the US.
[+] [-] chollida1|10 years ago|reply
Actively managed mutual funds are going away fast and that's to everyone's benefit. Some were charging 2% yearly plus a fee when you bought or when you sold( redemption fees). I can't think of a single reason that anyone should have any money in an actively managed mutual fund.
If there is a continuum of hedge funds to ETF's, actively managed mutual funds are literary the worst of both worlds. High fees and low ability to make returns.
From where I sit, the biggest jobs that are in danger are sales jobs. There used to be teams of people at mutual fund companies whose sole job was to sell their products to Investment advisers at brokerages with the hopes that the advisor would put their clients money into these funds.
As someone who is on the side of actively managing money, I see this as a strong positive. The more passive money there is sloshing around the more arb opportunities there are!
[+] [-] panglott|10 years ago|reply
[+] [-] jensen123|10 years ago|reply
I kinda agree with you. However, theoretically, I would have been more than happy to put my money in an actively managed fund IF that fund was managed by someone with a very high intelligence and who was able to sit still. By sitting still, I mean not buying and selling all the time. Often, it's far more profitable to sit on shares for many years, rather than buy and sell all the time. But I guess those fund managers are expected to come into some office every day at least from 9 to 5, regardless of whether there is anything to do. Also, they probably have co-workers and bosses who ask them what they're doing. Maybe it would be kinda boring to answer "nothing" every day for like 2 years in a row.
[+] [-] cm2187|10 years ago|reply
I am not against ETF, in fact that's what I would use, but it comes with its own problems.
[+] [-] jackcosgrove|10 years ago|reply
In the medium term active and passive management will eventually reach equilibrium. Passive funds cannot perform price discovery as well and rely on active funds to do this. However the ability of computers to discover prices will eventually exceed that of humans not possessing insider knowledge. My money is, literally, with the computers.
[+] [-] slg|10 years ago|reply
It will depend on your bank, but anecdotally it seems commission free mutual funds are more common than commission free ETFs. If you are the type who wants to invest X% of every paycheck (i.e. making multiple trades a month), are only investing a small amount of money, or are only investing for the short to medium term, you are likely better off with the the higher fee and lower commission. Retirement savings tend to be none of those three categories, so ETFs are almost universally better in that regard.
[+] [-] vchynarov|10 years ago|reply
This is (Canadian) RBC - Direct Investing.
In addition this particular fund also significantly outperformed other ETFs during 2008-09.
[+] [-] ttcbj|10 years ago|reply
1. I think passive money is generally not taking any position on whether an asset is over or under priced, and as a class tends to be very inactive. I doubt it either increases or decreases arb that much.
2. I think what would increase arb opportunities would be:
A. A critical mass of misinformed active managers
B. So few active managers that the market is gameable
However, as the number of active managers decreases, one would think that the misinformed ones would go first (A), and that (B) won't be a linear progression, but a sudden tipping point at a very low level of active management.
Actually, I sort of think the final statement is reversed. As the number of active managers declines, and the average active manager becomes more competent, it will become harder for the active managers to find profitable arbitrage opportunities.
[+] [-] optimusclimb|10 years ago|reply
If someone (or some company) is claiming to be better than me at using my money to make money, surely they'd agree to put skin in the game, and only profit when I do?
If they don't feel confident enough about their choices making money (and hence, ensuring they get compensated), why should I?
edit: I was referring to the types of funds typical retail investors are in, not hedge funds.
[+] [-] jzwinck|10 years ago|reply
Imagine you believe that mail order companies are poised for rapid growth in coming years. You don't know which ones specifically, and there are thousands. So you buy a mutual fund which holds hundreds of these companies. This gives you some diversification and lets you make your bet with only a single commission to buy and sell.
But the fund manager may disagree with your investment thesis. She may be fully convinced that online shopping has already destroyed the mail order business permanently. She would therefore gladly run a fund for you, but she would not bet on its performance herself.
For a somewhat more real-life example of this, watch or read "The Big Short." The protagonist wants to buy something that the banks think will lose money.
[+] [-] prostoalex|10 years ago|reply
Pay for performance creates an incentive for outsize risks. Sure, our Subprime Mortgages Fund and Greek Bond Opportunities Fund were down this year, but Powerball Tickets Fund and Vegas Bet Everything On Red Fund more than covered those losses.
If you're a risk-averse investor, your most likely match is some variant of slow-growth, growth-at-reasonable-rate or dividend-reinvestment strategy. Paying for assets under management motivates the advisor to at least not lose all your money and keep you as a client.
[+] [-] foxylad|10 years ago|reply
I like the argument that if anyone could pick stocks better than average, they'd end owning everything - but I don't pretend to understand the share market well enough to be confident investing everything according to that.
But if the very people who know most about the share market charge fixed fees, this seems to me to be an implicit recognition that they can't out-perform the market in any meaningful way. I once engaged a broker in an argument about this, and they ended up admitting that the only value they added was managing the whole shares-bonds-cash mix for people who couldn't or didn't want to do it for themselves.
And back to the point of the article, automating that management would not be difficult. I agree that there are hard times ahead for most brokers.
[+] [-] jacobwcarlson|10 years ago|reply
If they were paid solely based on performance then you would also pay points on the spread between what you lost vs. what some benchmark lost that year. I can't imagine many investors wanting to take on that kind of risk.
[+] [-] Htsthbjig|10 years ago|reply
Simple, As Warren Buffet said when he created an investment firm, he expected to be judged over the general market wave, that is if the market crashes 75%(like in 2008 or the great depression) just maintaining the funds worth(or loosing small) is a great deal and you are a genius. If the market skyrockets 50% per year and you get 10%, you are not so good.
Putting it another way, they are already based on performance over the market.
[+] [-] minikites|10 years ago|reply
http://www.theguardian.com/books/2014/jun/13/how-not-to-be-w...
>Here's a cautionary tale. A broker sends you 10 free stockmarket predictions in a row that all come true, and then asks for money for an 11th. The stockbroker's offer seems reasonable enough. His strike rate is 10 out of 10, so surely he will be right the next time, too? Don't do it! If you pay for the 11th tip, you will have fallen victim to the oldest scam in the book. Unknown to you, the stockbroker has been sending every combination of possible predictions to tens of thousands of other people, and you are one of the unlucky few who got 10 good ones in a row.
>Imagine you are considering investing in a mutual fund. Before funds are opened up to the public, they are often monitored in-house. Funds that don't perform well can be shut down, without the public ever knowing. Ellenberg warns that if you are seduced by funds with an eye-popping rate of return, then you are walking into the Baltimore stockbroker's trap: "You've been swayed by the impressive results, but you don't know how many chances the broker had to get those results."
[+] [-] wodenokoto|10 years ago|reply
So that should definitely open up some opportunities to beat the passive funds.
[+] [-] HappyTypist|10 years ago|reply
[+] [-] jgalt212|10 years ago|reply
It's a significant subplot of the book, Ugly Americans
https://en.wikipedia.org/wiki/Ugly_Americans:_The_True_Story...
[+] [-] beejiu|10 years ago|reply
[+] [-] thibautx|10 years ago|reply
[+] [-] tma-1|10 years ago|reply
[1] http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2663398
[+] [-] jeremyt|10 years ago|reply
[+] [-] whatok|10 years ago|reply
[1] https://en.wikipedia.org/wiki/James_Chanos
[+] [-] PierreRochard|10 years ago|reply
[+] [-] tryitnow|10 years ago|reply
[+] [-] cm2187|10 years ago|reply
[+] [-] brownbat|10 years ago|reply
So if ETFs are taking over, it may be an improvement overall, but it's worth thinking through the black swans, the new low probability high impact risks that this creates.
Bloomberg has had a few comments about liquidity risks for ETFs on their site and in the Odd Lots podcast.[0] On the other hand, they've made these comments for a few years now, so maybe this is a chicken little story. Or maybe it only kicks in under certain conditions, like if we saw interest rates, demand for goods, and inflation spike, people start moving to other investments, potentially causing a sudden run on funds that are stuck holding only bonds without any real returns or way to offload them?
[0] http://www.bloomberg.com/news/articles/2014-09-23/etf-liquid...
[+] [-] x5n1|10 years ago|reply
[+] [-] p4wnc6|10 years ago|reply
I mentioned in a previous thread about this -- I worked for several years in an asset management firm before moving on to other things. We frequently assisted clients in the process of firing us. We would prepare white papers for them, give them data and slick charts. Sometimes this would literally disrupt the quants and research team and we had to join in creating materials that would be used by client board members in their presentation of the decision to fire us. Sometimes we even had to provide examples of this kind of work when a client was hiring us -- our helpfulness and data services during the times when we are fired was actually a prominent selling point. We were basically saying, hire us now and you get to look fancy. Fire us later and we'll set you up to look principled and full of conviction to do the right thing as a sophisticated board member.
There are all kinds of laws restricting gifts you can give to clients or receive from clients, and just as many stories about how such-and-such a client took some regional sales manager out to a strip club, or flew them some place and got them a reservation at some exclusive restaurant or something.
It's all political. As a technical person, you are hired to look fancy on paper. I remember overhearing my boss bragging to a prospective client that the team had an "Ivy League graduate" leading up their quantitative software development ... on my second day of work! I had zero financial experience of any kind at the time. It was ludicrous.
It's painful to see everyone buying into this. I hope beyond all hope that clients do a better job of actually holding firms responsible for returns. Firms that don't engage in legitimate statistical research to determine an edge in investing will fold up, and firms that actually have a chance at superior returns might actually start letting their staff do real research work instead of bullshit marketing and catering to client political whims.
But that's a fairy tale world. This will all blow over and clients will continue dedicating huge blocks of their endowments or retirement funds to active managers for political reasons and will continue happily not holding those managers accountable for inferior returns.
[+] [-] MakeUsersWant|10 years ago|reply
There must be some lean way to exploit that.
In theory, you could manufacture status for your consulting firm. (So that's why BCG and McKinsey plaster German universities with their ads.)
[+] [-] chvid|10 years ago|reply
The industry has gotten much tighter regulated since the GFC giving the incumbents an even stronger grip on their position.
And the specific low-cost index funds, the article is dealing with, have been around for decades now. I really don't think the headline is called for.
[+] [-] dantiberian|10 years ago|reply
[+] [-] ttcbj|10 years ago|reply
[+] [-] jheriko|10 years ago|reply
i understand what is being said here. i don't think it is revelatory.
on the other hand this article just adds another small contribution to my strong distaste for the practices of the financial industry overall.
investing money into funds to make more money seems great at first glance, but once you dig into the details and realise the number of people involved taking their cut, how many companies are effectively running off of weird loans through 'ownership', and how many piles of assets are owned by people as a mechanism to make more money... its all very distasteful to me. :(
then again, i don't like investment. i don't want it for my own company. it looks like a way to become beholden to others and introduce a risk of spending more money than you actually have.
[+] [-] willholloway|10 years ago|reply
[+] [-] AndyMcConachie|10 years ago|reply
Where there is a buck to be made, someone will make it. All this talk of index funds ruining capitalism just sounds like a bunch of whiny fund managers not getting their cut.
[+] [-] nether|10 years ago|reply
[+] [-] elihu|10 years ago|reply
[+] [-] rockinghigh|10 years ago|reply
[+] [-] JunkDNA|10 years ago|reply
[+] [-] elihu|10 years ago|reply
[+] [-] klipt|10 years ago|reply
[+] [-] stouset|10 years ago|reply
[+] [-] clutchski|10 years ago|reply
[+] [-] alistproducer2|10 years ago|reply
[+] [-] atemerev|10 years ago|reply
"Active" brokerages are biting the dust? Well, good riddance! Moving people out of the loop is generally a good idea.
Now, passively managed funds are a good thing, during the growth market. However, once around every ten years, a recession comes. Then, suddenly, index-tracking funds become passé, and everyone wants a strategy to survive the market downfall.
And we have a lot of things to bring in from the current tech state of the art. Blockchain is ingenious, and the art of defining modern financial instruments using blockchain features is in its infancy. So, there is a lot of work to do, and lot of potential to grow.
[+] [-] wrong_variable|10 years ago|reply
[+] [-] arca_vorago|10 years ago|reply
So once even the 200k/year lawyer down the street is suddenly homeless because he actually had negative net worth, then it will be too late, but the real point is that there is no more money to be extracted from the lower classes except by death by a thousand cuts (taxes), so all the middle men hedge funders etc are going to be mergered and acquisitioned away as the banks learn how to manipulate the blockchain market and take it over just like they have everthing else.
Digitalization of the financial industry is just the buzzword scapegoat they are going to use to get it done. The same way in which, you see the former director of NSA leaving and joining a bank, and then yelling doom and gloom about hackers zeroing out accounts. All that tells me is that is what they have already planned.
I can see the headline now: "Hacker breach $BANKS, transfer $BILLIONS. Another bailout unavoidable to prevent collapse."
I've said it before, and I'll say it again, the elite oligarchical international bankers are closer to terrorists than businessmen.
[+] [-] jeffdavis|10 years ago|reply
I have a strong feeling that the contents of the index (or at least weights) can still be manipulated. And also that the fees are just moving down the food chain somehow.
If you think I'm wrong, just consider that a public company can own stock in another public company.
This will all become more obvious when "passive funds" take over more of the market.
[+] [-] erikb|10 years ago|reply