Passive investing is trouncing all active managers from hedge funds, mutual funds, to pension funds, and now college endowment funds. So hard to beat the market when they are managing billions. But I think now that indexing has proven to be so successful, would this be the seed of its destruction??? Does this mean when everyone gives up on active management and throw in the towel and buy index funds then it's the perfect time to be an active manager and time the market?? Just trying to be contrarian thinking on the macro level. ================================================== "From his home office in Charlotte, one of the most successful investors in higher education plies his trade in blissful obscurity. Bill Abt employs no stable of hotshot bond traders. He doesn’t dabble in the fanciest Silicon Valley venture capital funds, hedge funds, or the latest computer-driven brainchildren of Ivy League physicists and mathematicians. Yet Abt, on behalf of Carthage College, in Kenosha, Wis., has returns that beat Harvard’s $37 billion endowment and most others. In the 10 years through the most recent college fiscal year, ended on June 30, 2017, the former beer company executive racked up a 6.2 percent average annual return, according to the school. That performance is better than 90 percent of his peers, based on data from the National Association of College and University Business Officers. Harvard’s endowment, the nation’s largest, averaged just 4.4 percent a year in the same period, in part because of heavy losses on investments in timber and farmland. At Carthage, Abt’s approach was more pedestrian: mostly low-cost, market-tracking index funds from Vanguard Group Inc., the same funds used by legions of do-it-yourself individual investors. Why isn’t reliance on indexing more common among those who oversee the nation’s half a trillion dollars in college endowments? “Maybe it’s too simple,” Abt says. " https://www.bloomberg.com/news/arti...dowment-manager-beat-harvard-with-index-funds
Picture this...the market has a down year. During the same year, you are an up and coming active fund manager who just had a positive year with minimal draw down. I would venture to guess you would be getting plenty of business.
Your first statement is not true. "Passive investing is trouncing all active managers from hedge funds, mutual funds, to pension funds, and now college endowment funds." All? All of them?
When the account is small, no problem swinging stocks here and there or sitting on longer term durations. But when these managers of 50 billion dollar hedge funds, not like you can swing millions of shares around easily and always in dark pools but there is no way they going to get entire order filled at same price and often times not the sizes they want or be forced to take more to get order completed. But the biggest amount of hell is liquidations and enough in cash to make redemptions. So for a hedge fund to equal an Index, hedge fund would have to make higher percentage to equal some Index. As I have studied so far regarding Hedge funds, few of them actually hedge, cause hedging costs even more money and for amount they have under management, could they buy enough options to hedge, or is the chart of some stock close to chart of S&P Index to use that as the hedge. There is always going to be some yahoo who made better for a year or couple than most of the hedge funds, let's see if they there after five years. I don't think you will get plenty of business, might get some, but many would keep you on a short list or list to keep an eye on. Only the greedy, who generally take way too risky chances plays one hit wonders.
I think the point of the article was that simple index fund beats most endowment funds. not just Harvard.