Q1 Market Commentary – April 2021

When powerful vested interests feel threatened by inconvenient evidence they often respond in the same way. Instead of challenging it head-on with counter-evidence of their own, they seek to undermine it by spreading and perpetuating myths. The tobacco industry spent billions obscuring the facts of the health effects of smoking over several decades. The fossil fuel industry responded in the same way to growing evidence of climate change.

Today, active fund management is facing a similarly existential crisis as a result of the rise of passive investing, which helps to explain the steady stream of myths we read about index funds. We are told, for example, that indexing makes markets unstable, that it threatens market efficiency and even capitalism itself — none of which is true.

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