đŸ€”In order to know whether passive investing has a pervasive, under-appreciated effect on the market, shouldn’t investors rely more on academic research findings?

30 December 2020

In reaction to the FT article ‘ a theory of (almost) everything on financial markets‘, I add that Academic research has shown no clear evidence of such a negative effect of ETFs on the market. On the contrary, the 3 main conclusions from the ETF Research academy are:

𝟏. ETFs help generates a more competitive asset management environment but they will not replace the best-performing active funds. But, in turn, those active managers must be able to show they can deliver true alpha.
𝟐. ETFs don’t automatically cause higher volatility and do not automatically increase the correlation between stock prices.
𝟑. An equilibrium will be reached in the market with a distinct place for both active and passive management styles. It is based on the idea that due to poor active manager performances, passive flows increase. Then, the more flows in passive fund increase, the more opportunities for active funds will arise, and that will at some point allow active funds to better perform.

👉 Relying on trustful sources to set one’s conviction is key to build efficient portfolio.

Marlene Hassine Konqui