A Product Proliferation Pandemic

So indexing is passive, aye? While we have nothing against passive investing – we don’t believe that active vs. passive is a mutually exclusive decision; there are good reasons to employ both approaches to accomplish investor goals – we can’t help wonder whether this has gotten out of hand. Thanks to the folks at Bloomberg for putting this little chart together; we had no idea the creative process had reached such extremes.

Rise of the Benchmark

How could so many indices exist? Look no further than the myriad of product teams looking to cash in on the passive boom. They sit around and actively think about how to build portfolios that can then be run passively. Active decisions, passive implementations. Not so passive. Most will fail and few will add value for investors, but they will be cheap, or at least cheaper.

And while cheap exposure can be great, investors can’t lose sight of the fact that all of these shiny new toys come with their own risks, without anything resembling meaningful risk management by experienced investment professionals. The question is, to what extent do you want your portfolio managed by marketing decisions?

Read our related blog, Non-Fundamental(ist) Extremism