index funds

Equity Mutual Funds’ “Active Share”

Here’s a remarkable initiative from the U.K., which you should not expect to see replicated here in the U.S., despite its significant value to investors. Neptune Investment Management, an active equity fund manager in the U.K., has announced that it will publish the “active share” if each of the funds it manages. What does this mean? Well, a fund’s active share is a measure of the extent to which the stocks in its portfolio differ from those comprising the index against which it should be benchmarked. For example, a large-cap U.S. equity fund might reasonably be benchmarked against the S&P […]

Where are the Customers’ Yachts?

Two recent articles on “top financial advisors” have left me slack-jawed with disgust. The first was in my local daily paper, the Naples Daily News (that’s Naples, Florida rather than Napoli, Italia!): “Thomas Moran, managing director of investments and a founding member of the Moran Edwards Asset Management Group of Wells Fargo Advisors in Naples, has been named by Barron’s as the top adviser in Southwest Florida.” Hey, congrats to Mr. Moran!  And what criteria were used to identify him as “the top adviser”? “Factors taken into account include assets under management, revenue produced for the firm and regulatory record, […]

Active vs. Passive Investing

How we characterize something often determines how we think about it.  For example, psychologists have shown that we respond differently to an investment represented as having a 45% probability of gain than we would if it were represented as having a 55% probability of loss.  From time immemorial, of course, salesmen have understood this perfectly well and exploited such behavioral biases to their own advantage. But I’ve been thinking about this in a different context: that of active vs. passive investing. Note that I did not characterize this as active and passive investing, but rather as active vs. passive, which […]
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