Michael Byery, one of the heroes of the book «Playing» and the movie of the same name, made a loud statement that the leading media paid attention to, including Forbes. In an interview with Bloomberg News, he said that money flows in index funds distort the prices just as CDO 10 years ago, and we can talk about the «index bubble», which burst burst into the future. I suppose he is mistaken.

Byery is not unique in his estimates. Back in 1975, the one when Jack Bogl from Vanguard launched the first index foundation for retail investors, Mary Holland, a representative of the «active» wing of the financial industry,

As the True Profi, nor Byery, nor Clarman made it difficult for dates — but so far the forecast for reducing the efficiency of the market and getting rid of the «index fashion» works with accuracy to the opposite. More and more active managers agree that the market is becoming increasingly efficient — progress is accurately evident compared to 1975 and 1991. The index investment received an additional «tide of strength» after the crisis of 2008-2009.

Index control is becoming more and more popular — according to

Markets are becoming more efficient. So call the situation when few people can benefit from using some information — it quickly becomes known to other market participants and is reflected in the prices of shares and bonds. It happens because the more professional investors compete in order to correctly determine and predict future prices, the more they neutralize each other. More and more models, analysts, speeds — and less and less opportunity to beat each other. As a result, those investors who just invest in the market with low costs are won. And those who are trying to collect commissions for the ability to choose shares or a moment to buy and sell securities lose assets.

I work a lot with private clients and I know that the issue of reducing the market efficiency due to the inflow of money in the index funds of many of them worries. Especially since concerns are heated by the «losing» side of active investors. Especially active in the «care» on the interests of investors and the market Representatives of hedge funds, completely billionaires — Akikan, Akman, Marx, Singer — who just did not notice the way of fighting indexes. It seems that the grazing criticism of the index investment, reaching up to comparison with Marxism, has a goal, and that is why.

Index investment is too little different from standard forms of investments, such as mutual funds. Because of the risk, show the results worse than the index (and fly out with well paid work) Many active investment managers are trying to lead their funds as close as possible to the index. In 2017, the British regulator

Index funds do not make it difficult, and facilitate the search for fair prices. When new dollars and rubles come to index funds, they do not distort the market, because indices are arranged, as a rule, on the principle of capitalization weighing. This means that the more the company, the greater the weight of its shares will be in the index. Add or yield a million, or one hundred million, or a billion — such an «opinion», expressed in the tributaries or outflows of funds from the index fund, is neutral for the market. It is active players that are the main market heroes that determine the direction of price movement. Active players make bets — and lose or won due to the combination of good luck (other errors) and their own skills.

This is done in his company SCION ASSET Management Michael Byurry. Previously, he made a bet (as long as unsuccessful) into individual companies of small capitalization, and now he is trying in the spirit of activist investors «to sell» management and actively «promotes» their own investments with the help of the media.

A successful forecast often creates a reputation for you — until time. The story is full of examples, when a successful forecast was followed by a series of failures and the loss of the status of the «Star» forecast «. Li Michael Byurry will be followed by them, while it is not known, but in the sustainable future of index strategies do not doubt.

Article author

If you like the news, support us like and subscribe to the channel.

Предыдущая статьяWhere to invest in euros?