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The bottom line is that the shift to passive investing has generated a significantly greater supply of lendable stock, resulting in larger aggregate short positions, lower lending fees and longer security loan durations. The result is that short-sale constraints that allow mispricings to persist are relaxed—stocks can be borrowed more easily, at lower prices, and for longer time periods. By their actions, passive investors are making the market more efficient. Palia and Sokolinski concluded: “By making short-selling possible, passive investors can complement the information acquisition efforts of active investors who are willing to short-sell stocks. As a consequence, markets can exhibit faster price discovery by incorporating negative information into stock prices.”

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While the active management industry rails against the evils of passive strategies (even declaring it’s “worse than Marxism”), there’s really no evidence that markets are no longer capable of allocating capital efficiently—there is still plenty of room for active funds to set prices.
My guess is that at least 90% of the active management industry could disappear and the markets would remain highly efficient.

Remember, the markets were doing a pretty good job of allocating capital prior to 1950 when the number of mutual funds first topped 100. That number was still only at about 150 in 1960, and we didn’t seem to have any problems allocating capital efficiently then.
Today there are more than 9,000 mutual funds and more than 10,000 hedge funds. Do investors really need all those active managers to ensure that capital is allocated efficiently? It doesn’t seem likely.

Quote (MrPatrickBateman @ May 9 2019 07:57am)

mein Fond ist endlich im Blus :thumbsup:

hat sich doch gelohnt ^_^