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How much passive investing is too much?

Warnings that index funds have broken the stock market all imply a threshold: a share of the market at which price discovery fails. Nobody making the argument names it. Owen Lamont, writing in the Financial Analysts Journal, argues that no such number exists short of complete passive ownership, and that what actually determines whether prices stay informative is who is left doing the trading. His case, the strongest peer-reviewed research against it, and what the performance

Robin Powell

Antique compass with blurred spinning needle on a nautical chart, symbolising the instability of UK fund persistence rankings

UK fund persistence: why yesterday's winners rarely repeat

Theodore Sturgeon argued that the surviving tenth of any field is worth finding. New data from S&P Dow Jones Indices tests whether that holds for UK funds. Of the 80 sterling-denominated UK equity funds in the top quartile at the end of 2021, three were still there four years later. Over two non-overlapping five-year periods, funds starting in the third quartile reached the top far more often than funds already there held their place.

TEBI

Aug 106 min read

A car rear-view mirror reflecting a road stretching into the distance — illustrating why past performance is an unreliable guide to future fund returns

Past performance is better at spotting losers than winners

Investors instinctively turn to past performance when choosing funds. But new Morningstar research on 6,003 European funds finds it is far more reliable as a warning sign than a buy signal.