Steven Richards: Is there a cost to following the ETF herd?

Lack of price discrimination

clock • 4 min read

One question mark over index-tracking products, writes Steven Richards, is that nobody quite yet knows the cause-and-effect relationship between the money flowing into them and their underlying holdings

Index-tracking investment is on an inexorable path forward. To the end of last year $130.7bn (£97.7bn) left actively managed US equity funds while $240bn flowed into products tracking US equity indices, according to Morningstar, and it is estimated exchange-traded funds (ETFs) now account for nearly half of all trading in US stocks. Yet as index tracking has grown in popularity, so have the concerns about the inadvertent risks they could be creating in markets or to investors. Witness the ongoing rise in the S&P500 as it continues to reach new all-time highs. With so much money going ...

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