What caught my eye this week.
Fancying that you’re living at the end of progress is a recurring human failing. Think of the Roman cartographers who didn’t put anything on their maps west of Britannia, the IBM president who in the 1940s thought the world would need five computers, or the bonce who wrote The End of History. [1]
Investors are no different. How many of us believe we’re marching ever upwards to a future inevitably dominated by index funds?
The secret is out, and money is flowing out of active funds and into trackers. What could possibly stop Vanguard ruling the world? Even I did a victory lap to that end to mark the death of index fund pioneer Jack Bogle last month [2].
Yet the same technology that makes it so cheap for Vanguard to run its index funds (hint, it has more than five computers) could also be their undoing.
In an op-ed for Investment News [3], Joshua Levin argues that:
In the next few years, the entire rationale for investing via funds will dissolve.
Advances in technology have transformed industry cost structures. Absent the need to pool assets for volume discounts, advisers and relationship managers can skip the one-size-fits-all cookie-cutter vehicles.
Instead, financial advisers will use software to truly customize portfolios, resulting in a more engaged and loyal client base.
It’s not the first time I’ve heard such talk. For instance robo-adviser platforms are exploring similar tactics in the US to eke out additional returns from tax loss selling.
I have some sympathy for this fund-less vision – and certainly a lot of curiosity.
But it’s notable that the platform Levin works for is focused on socially responsible investing.
Nothing wrong with that. However as a guest post on the Epsilon Theory [4] blog pointed out in an unrelated article this week, ethical investing is being seen by some active managers and advisors as a way to reinvent active management for a new breed of customer.
And a handy side effect is they can keep their jobs and higher fees:
This is an admittedly clever strategy. At least in theory, it moves the conversation away from fees and performance.
Now we’re talking values.
‘Cause if performance is pretty decent, and the fees are reasonably competitive, wouldn’t you rather have a portfolio aligned with your values? Isn’t the alignment of your investment capital and your values worth it?
Don’t you want to make a difference?
Watch this space. And don’t write history off too soon!
From Monevator
Important note: We have republished Tuesday’s article: ‘Who are you KID-ing? Understanding the ongoing charge figure of an investment trust. The first version had a big error in how total charges were calculated. (We were led astray by a miscommunication). Please re-read! – Monevator [5]
From the archive-ator: Admit it, you miss the market meltdown – Monevator [6]
News
Note: Some links are Google search results – in PC/desktop view you can click to read the piece without being a paid subscriber. Try privacy/incognito mode to avoid cookies. Consider subscribing if you read them a lot!1 [7]
Pension credit reforms set to save government £400m [Search result] – FT [8]
Ofwat’s pushback against water companies could mean cheaper bills – ThisIsMoney [9]
House price growth at near six-year low on Brexit fears… – BBC [10]
…but Northern cities have seen a price boom since referendum – ThisIsMoney [11]
Number of young adults on property ladder plunges by a third in a decade – ThisIsMoney [12]
Italy has slipped into recession – Business Insider [13]
[14]
Stock picking is hard: A reminder – The Reformed Broker [15]
Products and services
Lloyds unveils 100% mortgage for first-time buyers – Guardian [16]
Minimum investment in Premium Bonds cut from £100 to £25 – AOL [17]
Ratesetter will give you a free £100 [and me a cash bonus] if you invest £1,000 for a year – Ratesetter [18]
Grape expectations: How to find the best value wine – Guardian [19]
London Capital & Finance mini-bond investors were promised 8%, now in limbo – ThisIsMoney [20]
Homes for sale in a forest [Gallery] – Guardian [21]
Comment and opinion
The futility of market timing – Albert Bridge Capital [22]
Home bias: A UK perspective – Bunker Riley [23]
One big thing – Of Dollars and Data [24]
Tim Harford: The super-rich are an easy target for tax [Search result] – FT [25]
Investing ability changes with age – Siliverlight Asset Management [26]
Declaration of financial independence? – Fire V London [27]
My investing journey – Young F.I. Guy [28]
Reentry into corporate life – indeedably [29]
Diving deeper into investment trust charges – IT Investor [30]
Social housing – not 100% mortgages – is answer to the housing crisis – SLIS [31]
Should you roll the dice on Games Workshop PLC? – ShareScope [32]
Investing in turnarounds and recovery stocks – UK Value Investor [33]
Brexit
Marina Hyde: Brexit Britain is now the only argument for rising sea levels – Guardian [34]
Brexit puts relocation on the agenda for one in three firms – Reuters [35]
UK manufacturers are stockpiling at the fastest pace in 27 years – BBC [36]
Poorer Brexiters voted to be worse off? There’s nothing wrong in that – Guardian [37]
London plumbing firm besieged by militant Leavers – via Twitter [38]
Gibraltar ‘colony’ row flares as EU makes travel visa-free for Britons – Guardian [39]
Marina Hyde: Brexit enters a state of emergency – Guardian [40]
Kindle book [41] bargains
Antifragile: Things That Gain From Disorder by Nassim Nicholas Taleb – £1.99 on Kindle [42]
ReWork: Change the Way You Work Forever by Jason Fried – £1.99 on Kindle [43]
Unscripted: Life, Liberty, and the Pursuit of Entrepreneurship by MJ DeMarco – £0.99 on Kindle [44]
Off our beat
How Martin Lewis became the most trusted man in Britain – Guardian [45]
Why are young people pretending to love work? – New York Times [46]
Chateaux-ed dreams: Turkey’s £151m castle ghost town – Guardian [47]
How to slow down time and live longer – Mr Money Mustache [48]
I’ll pay what they pay: Micropayments vs advertising – Signal vs Noise [49]
Why Britain can’t get enough cocaine – Guardian [50]
And finally…
“Probability is not a mere computation of odds on the dice or more complicated variants; it is the acceptance of the lack of certainty in our knowledge and the development of methods for dealing with our ignorance.”
– Nassim Nicholas Taleb, Fooled by Randomness [51]
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- Note some articles can only be accessed through the search results if you’re using PC/desktop view (from mobile/tablet view they bring up the firewall/subscription page). To circumvent, switch your mobile browser to use the desktop view. On Chrome for Android: press the menu button followed by “Request Desktop Site”. [↩ [57]]