What's the recipe for taking down closet indexers? The availability of true index funds, the wide dissemination of performance figures, and advisors taking up the indexing mantle.

Morningstar guru John Rekenthaler makes that case in his regular column, this time tackling the question of why closet-indexers survive on the other side of the Atlantic but not here. His answer: Europeans do have access to index funds (especially ETFs) and performance figures, but their advisors haven't embraced investing.

So I guess you can belatedly add "not having to worry much about closet indexers here in the U.S." to your list of things to be thankful for this year.

Rekenthaler addresses European closet indexing in response to recent news that the SEC's European peer, the European Securities and Markets Authority (ESMA) is worried about closet indexers. Rekenthaler's point is that closet-indexers fell from prominence here thanks to market forces, not regulation, and the same thing can happen in Europe. 

Edited by: Neil Anderson, Managing Editor


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