The best lack all conviction, wrote Yeats, while the worst are full of passionate intensity. Investors would go along with that. Allocations to index funds and exchange-traded funds – opinion-less pools of capital that track a specific stock or bond benchmark – have surged in recent months. Vanguard Group, the American indexing juggernaut, now plans to use the UK as a base for a global expansion.
Faith in the genius of stock-pickers is at an undeniably low ebb. Two years ago, for example, quoted UK fund managers traded at a vigorous 15 to 23 times forward earnings. They’re now between 5 and 14 (and, stripped of takeover speculation, would be cheaper still). Institutions are now paying heed to the evidence of a series of Standard & Poor’s studies which suggest that the best way for investors to guarantee their fair share of market returns is to throw the net as wide as possible while keeping fees to a minimum.
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