David Jane: 'Passive' investing is anything but

ETF bubble based on flawed logic

clock • 6 min read

ETF buyers are a herd chasing the same fashions and trends, argues David Jane, with passive investing leading investors to place increasingly disproportionate amounts of capital within an ever narrower universe

The past few weeks have seen a number of headlines about the growth of exchange-traded funds (ETF)s and index investing in general. ETFs, particularly in the US, have come to dominate retail flows, while active funds have been redeeming. At the same time, in terms of equity market trading, they are becoming ever greater. It is presumed by the theorists that ETFs have a broadly neutral impact on share prices and that ‘price discovery' will continue despite the ever dwindling ranks of active managers but, as ETF flows are not equal across all stocks, we do not think this is the case. Some ...

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