Index funds are on a roll. Funds that passively track indexes are popular because they’re cheaper than the alternatives run by active money managers, and the robotic, rules-driven funds often outperform their human rivals, too.
In fact, passive funds will swallow up the US stock market before too long, according to Pictet Asset Management (paywall). Index trackers currently hold more than 40% of US stocks, according to Pictet’s analysis, and if the present rate of growth continues they could eventually own everything by 2030, or perhaps a bit before. Passive funds now control more than 30% of all US assets:
stumpyjoepete: i guess one thing to worry about is that the HFT folks have an easier time skimming off the top of those by doing cross-market frontrunning, iiuc
Some older articles I posted were about this means the stock market could totally fail to allocate capital. It also calls into the question the whole idea of the stock market and if it’s either useless in general or will stop allocating capital, the question becomes like “Why not nationalize it?“
“If these trends continue-”
It won’t happen. There is nothing to suggest that they have some sort of exotic characteristic that will become the new dominant paradigm that is the gunpowder of finance and which will push all other funds out of the market.
Probably capital allocation is currently overvalued because it controls the capital and thus decides how much it gets paid. Passive funds will continue to expand for a while and then slow down as the market is corrected.
Or something. I’m a supervillain, not an economist.
![theviveen:
“ EPSON QC-10 [1983]
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The fun part is all that fancy writing to the right of 日本語 just says “paasonaru konpyuuta”.](https://78.media.tumblr.com/084878d2eb8081e821fd9baca0618d26/tumblr_mmkfcx3Ou21ra380fo1_1280.jpg)
