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The "smart money" would start buying, but I imagine the concern is that as passive instruments become the majority of the market, there wouldn't be a deep enoug
by AlanYx 7y ago
The "smart money" would start buying, but I imagine the concern is that as passive instruments become the majority of the market, there wouldn't be a deep enough pool of assets held by "smart money" to provide offsetting liquidity in the way you describe.
- mox1 7y agoBut wouldn't this reach some sort of equilibrium point? IE if a smart person with a lot of money think there is no "smart money" left, wouldn't (s)he just start their own smart money hedge fund to provide / do this? If nobody is left to do thing X AND thing X is basically guaranteed profit, isn't it natural for people to step in and do thing X?
- pas 7y agoBut we already have that. Gold. Or CHF. The problem is that it takes roughly 10 years to outshine the stock market.
- SubiculumCode 7y agoI know next to nothing about investing, but I thought the article said that passive instruments are a very small portion of the market...and also that in house indexing has always been a thing.
- chawco 7y agoBut doesn't it seem like that, as total ownership of the market shifts towards passives, higher returns would be driven by funds running active strategies such as these, thus making them more attractive investments? It seems like this sort of thing chases an equilibrium.