STREET DOGS: Facts on funds
According to Barron’s, there’s almost $7-trillion in US funds that don’t have a manager actively evaluating its holdings
Some comments from Barron’s on US index funds: Today, index funds account for 43% of all stock fund assets, and are expected to reach 50% in the next three years. In total, there’s almost $7-trillion in US funds that don’t have a manager actively evaluating its holdings. The problem, critics say, is that index investors aren’t allocating capital properly. That’s because the biggest stocks make up the biggest percentage of most indexes. So new money going into index funds means that these already large stocks take in proportionately more money, getting more expensive, whether their business warrants a higher stock price or not. Though there is now a riot of indexing — there are more than 5,000 indexes — the vast majority of money has poured into the S&P 500 and other large-company indexes, a trend that could starve capital from smaller companies. The third problem: as active managers die off, the ability of the market to price publicly traded businesses diminishes. Fourth: ownership ...
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