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Rekenthaler Report

The Latest Salvo Against Indexing

They lead to lazy CEOs and fat-cat profits.

From the Beginning
This column is a companion to August's "Are Index Funds Too Soft on CEOs?" That article began in medias res, but unlike a proper epic, it never got around to the beginning. This time I will take the matter in proper linear order, along the way offering additional thoughts, as I have had another month to think through the issue.

To start: There will always be arguments against indexing. If passive funds never existed, traditional fund managers would be collecting an additional $40 billion in annual fees (roughly speaking, $5 trillion held by index mutual funds and exchange-traded funds times 0.80% for actively managed funds' expense ratios). When $40 billion are put into play, people fight.

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