Quantcast
The MFWire
Manage Email Alerts | Sponsorships | About MFWire | Who We Are

Subscribe to MFWire.com's News Alerts [click]

Rating:Indexed Isn't Always Passive. Wait, What? Not Rated 0.0 Email Routing List Email & Route  Print Print
Wednesday, September 30, 2015

Indexed Isn't Always Passive. Wait, What?

News summary by MFWire's editors

Passive, it turns out, doesn't mean the same thing as indexed, so stop using the words interchangeably!

John Rekenthaler
Morningstar, Inc.
Vice President, Research
In a recent column, Morningstar's John Rekenthaler calls on fundsters to stop treating all indexed funds as if they're equally "passive." He warns the mutual fund industry that so-called smart beta (M* calls it "strategic beta") is indexed without being truly passive. The whole idea is to be smarter than just investing in everything. Rekenthaler calls smart beta funds the modern successors to quantitative (quant) funds.

Rekenthaler settles on a difficult active versus passive terminology, as envisioned by Morningstar's Tom Idzorek, who in turn drew the ideas from Morningstar's Don Phillips. They would divide funds into four groups, according to how they weight and implement their investments.

Truly passive funds use market capitalization weighting and passive implementation (i.e. investing in everything). Strategic beta funds use their own active, rules-based weighting systems but a passive implementation (i.e. investing in everything that fits the rules). Traditional active funds follow the traditional market weighting ideas to fit into their style boxes but then actively implement by picking their own stocks and bonds within their box. And "alternative active" funds both follow their own, active weighting and implement it their own way.

Active versus passive isn't a dichotomy; it's a spectrum. 

Edited by: Neil Anderson, Managing Editor


Stay ahead of the news ... Sign up for our email alerts now
CLICK HERE

0.0
 Do You Recommend This Story?



GO TO: MFWire
Return to Top
 News Archives
2024: Q2Q1
2023: Q4Q3Q2Q1
2022: Q4Q3Q2Q1
2021: Q4Q3Q2Q1
2020: Q4Q3Q2Q1
2019: Q4Q3Q2Q1
2018: Q4Q3Q2Q1
2017: Q4Q3Q2Q1
2016: Q4Q3Q2Q1
2015: Q4Q3Q2Q1
2014: Q4Q3Q2Q1
2013: Q4Q3Q2Q1
2012: Q4Q3Q2Q1
2011: Q4Q3Q2Q1
2010: Q4Q3Q2Q1
2009: Q4Q3Q2Q1
2008: Q4Q3Q2Q1
2007: Q4Q3Q2Q1
2006: Q4Q3Q2Q1
2005: Q4Q3Q2Q1
2004: Q4Q3Q2Q1
2003: Q4Q3Q2Q1
2002: Q4Q3Q2Q1
 Subscribe via RSS:
Raw XML
Add to My Yahoo!
follow us in feedly




©All rights reserved to InvestmentWires, Inc. 1997-2024
14 Wall Street | 20th Floor | New York, NY 10005 | P: 212-331-8968 | F: 212-331-8998
Privacy Policy :: Terms of Use