Active vs passive

The best Vanguard passive index tracker funds for UK investors

If you’re an investor based in the UK, you’ve probably heard of Vanguard. They’re a hugely popular fund manager, and offer a slew of attractively priced, predominantly passive, funds for investors to choose from on their platform. But with so much choice comes some tricky decisions. Which fund, or funds, should you choose? Which is …

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Are large stocks getting larger?

This is the sixth part in a series examining the evidence behind the claim that passive investing is causing a bubble. For the previous part, on whether passive investing is making the market more concentrated, click here. — Looking at the behaviour of the largest stocks in the world can offer us some interesting insights …

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Passive investing and market crashes

This is the fourth part in a series examining the evidence behind the claim that passive investing is causing a bubble. For the previous part, on whether passive investing is setting prices, click here. — Let’s assume for a moment that there is a relationship between indexing and market crashes. Indexing, for whatever reasons, increases …

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The market share of passive investing

This is the second part in a series examining the evidence behind the claim that passive investing is causing a bubble. For the first part, on Sharpe’ Arithmetic of Active Management, click here. — For any investment strategy to distort the market, it must be big. Very big. And, despite all the clamour around the …

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Is passive investing causing a bubble?

Is passive investing really worse than Marxism? Is it creating a ‘frightening risk for markets’? Or are the concerns around passive investing nothing more than trumped-up fearmongering? This series begins by examining one of the most fear-inducing (and therefore one of the most persuasive) claims thrown at passive investing – that the rise of passive …

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Problems with smart beta – part 7.2: Factors work better in small caps

This is the second post in a mini-series on how factor returns from academia can be different to those from smart beta investing. For the previous post on how long only smart beta exposure compares to long/short factor exposure, click here. A sad truth for investors is that size really does matter. But contrary to …

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Problems with smart beta – part 7: Academia is not real life

This is the seventh post in a series discussing some of the problems associated with investing in “smart beta” strategies. For the previous post on how combining factors might result in regular beta, click here. The Tacoma Narrows bridge spanned the Tacoma Narrows strait in the US state of Washington, and was opened to the …

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Problems with smart beta – part 5: It’s impossible to know when a factor stops working

This is the fifth post in a series discussing some of the problems associated with investing in “smart beta” strategies. For the previous post on how factors can decay after they become widely known, click here. We saw in a previous post that factors in the US have been providing pretty torrid returns since 2003. …

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Problems with smart beta – part 1: The cyclicality of factors

This is the first post in a series discussing some of the problems associated with investing in “smart beta” strategies. Everyone’s seen the quilt chart used to show the return dispersion between asset classes, but it works equally well for factors. Factors have just as much dispersion as asset classes, and can have wildly different …

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Problems with smart beta

Before ESG investing came along, “smart beta” was the next big thing. Smart beta strategies involve an investor tracking an index, much like traditional index investing. Where smart beta differs from index investing is in the composition of the index being tracked. Smart beta strategies track indices which have been weighted in some other way …

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Multifactor investing – part 2

Considerations before investing in multifactor funds   As we saw in my last post, multifactor investing has provided investors with a way to harness the benefits of factor investing in a more diversified way, with lower risk than investing in any single factor. The risk of any one factor underperforming is reduced by using a …

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