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Comment by qubax | Hacker News Reader

> The Economist had an article about this issue recently and they concluded that the main effect of Index Funds was to drive low-performance fund managers out of business.

If that's the case it should drive most fund managers out of business since most of them don't beat the S&P over time.

https://www.cnbc.com/2017/02/27/active-fund-managers-rarely-...

And as more money gets funneled to index funds, the vanguards and fidelitys of the world could lower fees on their index funds which should put even more pressure on most fund managers which could create a vicious cycle. Maybe we'll be left with just index funds and a handful of rock star fund managers.

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It also very much depends on who is doing the investing. If you're CALPERs with ~$320bn you don't want to put it all into the S&P 500. Diversification through exposure to other, ideally uncorrelated, equity types or asset classes.

The best asset managers charge low fees, they make up for it very comfortably in volume and long term holdings. Warren Buffet famously doesn't sell, he doesn't need to make thousands of deals a year to eke a small profit from each, he needs to judiciously pick fewer things that are going to do well in the long term. All too often people don't want to properly invest however, they want to speculate.

Though some academics are challenging the conventional consensus that active management is not worth it:

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3247356

Also, I'd like to note, it probably depends on the maturity of the market you're looking it. It will probably be harder to beat passive investing in US fixed income than frontier economies equities.

Edit to add: A few big & cheap index funds and a couple of rock star active managers sounds good to me, actually.

They’re already an order of magnitude or more lower on fees - I don’t think there’s even room for them to go much lower. What would be nice if if funds lowered their fees to be closer to the index ETFs

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