There's an inflationary aspect associated with passive investing, and this is one of the areas that's not iwould argue, it's not widely discussed or understood. Passive vehicles don't care at all about valuation or forward expected returns. They are presumed to actually be imbedded in the existing security prices. The second characteristic is is that they abhor cash. And so they tend to carry zero cash, or very close to zero cash.
In this episode of Infinite Loops we spoke with Michael Green, Partner & Chief Strategist at Logica Capital Advisers. In a wide-ranging discussion that could have lasted the rest of the day, we covered:
- The passive narrative, and its impact on market structure.
- Vanguard and Blackrock’s lobbying efforts.
- Target Date Funds and their increasing dominance.
- COVID-19 and the government’s response.
- The power of language.
- Michael’s recent paper: Policy in a World of Pandemics, Social Media, and Passive Investing (linked below)
And much more. You can find Michael’s paper here: https://www.logicafunds.com/policy-in-a-world-of-pandemics