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At some point, someone (or a collective) needs to make a decision about how capital is allocated among different firms. Traditional money managers may not be t
by jeffdavis 7y ago
At some point, someone (or a collective) needs to make a decision about how capital is allocated among different firms.
Traditional money managers may not be the right way to do that, but we should be clear that decisions are still being made somehow.
I guess it's not the investors plowing money into the first index fund they find. And it's not the index fund, because they don't do a lot of management.
So I guess it's a handful of hedge funds that set prices?
- Excel_Wizard 7y agoIndex funds do not contribute to the process of price discovery. As long as a certain fraction of trades are performed by active investors, price discovery will continue to be accurate. Currently, active traders dominate, making up the majority of trades. This fraction could be much smaller than it currently is and still be OK.
- jeffdavis 7y agoThere are still people discovering prices, and they are still getting paid somehow, probably by first-mover advantage. Are we sure that the right model is to just watch these first-movers and do what they do?