`Jack` Bogle passed away this past January. No matter what investment camp you belong to, he has undoubtedly impacted investment thinking, products, and services.
Last summer, Victor Hagahni and James White – Victor is the Founder and CIO of Elm Partners, and James is Elm’s CEO – wrote an article Is Vanguard More Rolls Royce, or Hyundai? that highlights an investment world particularity:
With most products and services – cars, doctors, food etc – better quality normally goes hand-in-hand with a higher price. Not so with investing.
They even quoted Bill McNabb, former CEO of the Vanguard Group saying:
`The whole cost argument from an investment perspective is counter-intuitive.`
Listening to Bill McNabb`s short interview[1] at the 2019 Academic and Practitioner Symposium on Mutual Funds and ETFs, he makes a very important point that is not well understood.
Over the past ten years, we have transformed the investment management space into
A low-cost product space
It is NOT a transformation into
A passive beats active space
The growth of robo-advisory (apologies for the umbrella term) is Not about passive over active. Robo-advisory is about the widespread use of low-cost products. We live in a world that it is becoming more difficult to imagine high-cost investment products.
One of the best examples of low cost, active and passive management, is Elm Partners. 12bps, tax harvesting, portfolio construction based on economic fundamentals and other liquid risk premia in addition to equity market Beta.
Listen to Victor Hagahni and James White discuss with me their approach which is for accredited investors only. Their offering includes less than half a dozen investment programs and the possibility of SMAs. Elm Partners does not aim to do everything for everybody. Low cost and transparency, are paramount for their business.
You can also follow their quarterly reporting on Seeking Alpha, here. You can follow their thoughtful research here. You can savor Victor`s TEDx Talk Where are all the Billionaires? & Why should We Care?: where he uses the puzzle of the missing billionaires to help us understand why most investors fail to capture the returns offered by the market. This actually leads into the main reasoning for Elm Partners investment strategy, the so-called “Active Index Investing.”
[1] Former Chairman and CEO of Vanguard, Bill McNabb Discusses the Future of the Investment Industry from the 2019 Academic and Practitioner Symposium on Mutual Funds and ETFs. Presented by UVA Darden and the Investment Company Institute. https://www.youtube.com/watch?v=Z8UQvkKbFZo
Book one hour with Efi – Ask me anything (AMA) for 0.10BTC – [email protected]
Efi Pylarinou is the founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer.
Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email