FYI: Earlier this year, passive management was attacked in two high-profile articles. Those criticisms were proven to be false – and driven by active managers seeking to protect their livelihoods. But that still left the question, which I now examine, of whether flows to passive funds have increased certain risks.
The active management industry has ridiculed passive investing for decades. The reason is that their profits – and their very survival – is at stake. The criticism reached an absurd level when a team at Sanford C. Bernstein called passive investing “worse than Marxism.” The authors of the note wrote: “A supposedly capitalist economy where the only investment is passive is worse than either a centrally planned economy or an economy with active market led capital management.”
Regards,
Ted
https://www.advisorperspectives.com/articles/2019/11/21/is-the-shift-to-passive-investing-increasing-risks
