January 12, 2017

...AND CHEAPER...:

The CEO of a $3.9 trillion fund giant has a message for money managers everywhere (Tina Wadhwa, Jan. 12th, 2017, Business Insider)

Money has been pouring out of active management and into index funds.

More than $1 trillion dollars has flowed into index funds over the past three years, according to the Investment Company Institute.

That spells trouble for active managers, which make a living trying to beat the index. 

Some are asking whether active management is "dead," according to  Bill McNabb, CEO of $3.9 trillion fund giant Vanguard. His firm  has been one of the biggest beneficiaries of the shift towards index funds.

In a blog post on January 10, McNabb said that  "active management can survive--and even succeed--but only if it's offered at much lower expense."  In other words, money managers need to drop their fees. 

Replacing the managers with AI will help keep fees down.

Posted by at January 12, 2017 6:16 AM

  

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