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10. November 2014 11:08
by Allan

Where are the ETF Market Wizards?

10. November 2014 11:08 by Allan | 0 Comments

In a world where the influence of passive investing continues apace, it is somewhat ironic that 2014 has been the year when the headlines have been dominated by the rock stars of the investing world.  Although Bill Gross and Neil Woodford perform their investment alchemy on opposite sides of the Atlantic, their ability to whip the financial press into a frenzy is not without question.

It will be particularly interesting to see if their ability to gain column inches correlates with the performance of their new ventures?  Indicative of the 'winner takes all' culture that pervades much of investment management, when it decides to make an unscheduled appearance, the law of unintended consequence will eventually add its own twist to the tale.  What I do find striking is that both of these personalities speak out about many aspects of the fund management industry they don’t agree with, yet their tendency to dominate the headlines is itself very unhealthy.

In the old days getting wealthy in the investment management industry meant you either needed to be a rock star or a hedge fund manager.  With absolute returns remaining elusive for an uncomfortably large percentage of wanna be alpha catchers, many hedge funds are mutating themselves into family offices.  In the meantime the world of passive indexing leaves its own indelible mark on the interpretation of where outperformance truly comes from in the first place.

If the future is to be dominated by passive investing, then where should one expect to find today’s and tomorrow’s ETF Market Wizards?  The internet revolution is barely 20 years old, but its impact on many industries is beyond doubt.  Over the last ten years there has been a shift of power as the process of democratization works its way through successive business models and represents the one thing that the incumbents fear the most.  In the world of investment management it seems inevitable that a large slice of that power will move from the professionals to the end investor.   

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