Mutual Fund Landscape

Last week, I took a look at how the growth of index funds has led to more scrutiny of passive investments and their impacts on the market. This week, we’ll look at more evidence of the futility of high cost active management as compiled in DFA’s recently updated annual Mutual Fund Landscape report. The analysis shows that a majority of fund managers evaluated failed to deliver benchmark-beating returns after costs.

Index Fund Attention Abundance

I attended a meeting in the early/mid 2000’s where Abigail Johnson, now the president and chief executive officer at Fidelity Investments, was the featured speaker. She tried to make the case that if everyone bought index mutual funds, that security prices would never change. In other words, she claimed that if index funds become too popular and investors “blindly” bought an index’s underlying holdings, that sufficient price discovery may not happen in the market.

So was Ms. Johnson right? Should the rise of index funds be a cause of concern for investors?

Q1 2019 Market Review

Remember how bleak the markets seemed at the end of 2018? All of the worries about whether the Fed may have applied the brakes a tad too long, an escalating trade war with China, a mid-term shakeup in Washington DC, ongoing Brexit drama, and a eurozone confidence slowdown? While some of those issues remain unresolved, hopes for a trade deal with China and an about face toward dovishness by key central banks buoyed markets in spite of a Polar Vortex and another government shutdown that created more headwinds.

US growth stocks, both small and large, were the big winners of the quarter, but every equity category saw gains.