In a recent opinion piece for Ignites, a notable publication for the ETF and mutual fund industries, I offered my views regarding the ways indexes have revolutionized the way people invest. To show how index products are helping drive down the costs of all products, I offered a number of examples of increased innovation and competition. I appreciated that Ignites allowed me a forum to demonstrate that the impact of indexes goes well beyond lowering fees, by also encouraging both active and passive managers to run their portfolios with increased transparency.
An excerpt of my article is shown below. For the full piece, please visit Ignites. Please note, the article is behind a paywall.
How the Index Revolution Has Pushed Innovation Industrywide
While increasingly precise indexes continue to help investors measure ever-more granular slices of the markets, they have also become the driver of investment product innovation.
When the first institutional index funds were created in the 1970’s, they were dubbed “un-American.” In the 1980’s, when the first equity index future and index option were listed, skeptics claimed that no one would continuously trade an index in real time.
But today indexes have exploded in number, changing the nature of how people invest and how asset managers, including active managers, build products. They have pushed fees for all products down, increased overall market transparency and prompted greater innovation.