Passive funds took power away from investors(matter-funds.com)
matter-funds.com
Passive funds took power away from investors
https://www.matter-funds.com/how-passive-funds-took-power-away/
27 comments
Pretty obviously market-testing some ideas on how to structure a tweaked index fund with higher management fees (references in the closing to charging 25 basis points and the "platform" which has no other details available)
Vanguard just cut fees days ago: https://www.etf.com/sections/daily-etf-watch/21-vanguard-etf...
This is "sponsored content" except it's on the HN front page. It's a marketing material as a blog post.
We can't know if the original upvotes are from PR firms or if are organic.
We can't know if the original upvotes are from PR firms or if are organic.
I actually believe the Vanguard story puts that fund in a positive light - they actively work to shield their investors from taxes, in a legal way. Sounds like a great deal for the customers.
It's quite obvious what happened there, but it's not necessary bad.
Please explain...
A user has a bone to pick/an incentive to make this point, which normally leads to bad submissions. However, in this case it is a legitimate issue to be discussed.
I actually assumed the account was compromised. The account managed to not really post anything in the preceding five years, and then went on an astroturfing spree in a single twenty four hour period.
You’re probably right, though.
You’re probably right, though.
It's probably not malicious. They may just be skeptical of Vanguard and want to spur discussion on what they think is important. Trying to bring up topics they find are worth discussing.
No/little activity for 4 years and then 3 posts on the same topic in 24 hours is more than a little suspicious, though.
This is a topic that's warming up in the investment space. There is a company, SAY, that is trying to get more shareholder participation.
Ultimately, the regulations need to change to allow fund holders to vote their stock. And this certainly can be enabled by technology.
In this scenario you wouldn't necessarily vote all 500 stocks of the S&P500 but you would set your preferences (always support board gender diversity, say on pay, etc... ) And the service would auto vote along your preferences.
Ultimately, the regulations need to change to allow fund holders to vote their stock. And this certainly can be enabled by technology.
In this scenario you wouldn't necessarily vote all 500 stocks of the S&P500 but you would set your preferences (always support board gender diversity, say on pay, etc... ) And the service would auto vote along your preferences.
Passive (index) funds have grown because they work.
Read "A Random Walk Down Wallstreet" or "The Bogleheads Guide to Investing", you'll see it clearly laid out. For the Cliff's Notes version, turn to YouTube and watch Warren Buffet, Jack Bogle, etc.
Index Funds enrich their investors. Actively managed funds enrich their providers.
Read "A Random Walk Down Wallstreet" or "The Bogleheads Guide to Investing", you'll see it clearly laid out. For the Cliff's Notes version, turn to YouTube and watch Warren Buffet, Jack Bogle, etc.
Index Funds enrich their investors. Actively managed funds enrich their providers.
Pretty meaningless to present the numbers for passive funds without including the numbers for active inestors.
Hi I wrote this.
The numbers for active funds differ depending on the kind of fund we're talking about. For the big mutual fund complexes it's actually pretty similar to passive funds (see here https://www.fundvotes.com/). To give a bit of context someone like Fidelity International [where I used to work] is at ~70% (https://www.fidelity.co.uk/voting-record/), which is about as low as i've seen.
The point isn't that passive funds are uniquely bad, because they aren't, but it matters more because of how big they have become.
The numbers for active funds differ depending on the kind of fund we're talking about. For the big mutual fund complexes it's actually pretty similar to passive funds (see here https://www.fundvotes.com/). To give a bit of context someone like Fidelity International [where I used to work] is at ~70% (https://www.fidelity.co.uk/voting-record/), which is about as low as i've seen.
The point isn't that passive funds are uniquely bad, because they aren't, but it matters more because of how big they have become.
The point is a good one that few people realize. If your holdings are in index funds, you're forfeiting your right to vote. It's almost criminal.
I don't know if a separate fund is the answer, though. Will my 401k offer Matter S&P shares? I sincerely doubt it.
To me this is a policy proposal that I'm surprised an Elizabeth Warren hasn't proposed. It's centrist in that it seems to really in inequality through corporate governance.
I don't know if a separate fund is the answer, though. Will my 401k offer Matter S&P shares? I sincerely doubt it.
To me this is a policy proposal that I'm surprised an Elizabeth Warren hasn't proposed. It's centrist in that it seems to really in inequality through corporate governance.
This is not a problem specific to passive funds. Many companies are structured this way and professional investors are OK with it. Look at BABA for example. I will say this: the whole point of equity is to give you control and dividends. If you don’t get both, you’re effectively investing in an elaborate ponzi scheme.
Good luck and a fine sentiment but the free rider incentives will favor cheaper funds with no corporate governance ambitions. The market for investors who care enough about corporate governance to subsidize others isn’t big enough for critical mass in a scale business.
I get that shareholders have powers to vote etc. but... are those vote usually used?
I have both ETFs and individual stocks, and in neither cases I use my shareholder power to vote or anything.
I have both ETFs and individual stocks, and in neither cases I use my shareholder power to vote or anything.
The success rate on proxy votes is fairly low but not at a rate where it effectively never happens. The actual voting mechanism might offer more of a poor behavior deterrent than anything else (like: votes happen and they do succeed, so management should act in the best interests of the firm otherwise you might become one of the stories of rare proxy victories)
And generally, unless you understand the business deeply and are actively aware of the trade-offs of your vote, you shouldn't be voting.
We can all yell "pay parity" and "tie CEO compensation to worker compensation", but there are trade-offs. It means high performers who earn their pay are more likely to go elsewhere, where they'll be properly compensated. And who takes their place? Most likely, someone less qualified who is on the other side of the bell curve.
I'm not saying CEOs are justified in their pay or the rank and file don't deserve better pay, but there's no free lunch. Business is complicated and the current policies were put in place with CAREFUL considerations of the trade-offs. If you don't understand them at a deep level, don't get involved.
We can all yell "pay parity" and "tie CEO compensation to worker compensation", but there are trade-offs. It means high performers who earn their pay are more likely to go elsewhere, where they'll be properly compensated. And who takes their place? Most likely, someone less qualified who is on the other side of the bell curve.
I'm not saying CEOs are justified in their pay or the rank and file don't deserve better pay, but there's no free lunch. Business is complicated and the current policies were put in place with CAREFUL considerations of the trade-offs. If you don't understand them at a deep level, don't get involved.
> We can all yell "pay parity" and "tie CEO compensation to worker compensation", but there are trade-offs. It means high performers who earn their pay are more likely to go elsewhere, where they'll be properly compensated.
Other than more than they're currently making, what does "properly compensated" mean? Should we not use our votes to help decide that?
> Most likely, someone less qualified who is on the other side of the bell curve.
Damn. Sucks for the board who chose a winner the first time and couldn't find another winner.
> Business is complicated and the current policies were put in place with CAREFUL considerations of the trade-offs. If you don't understand them at a deep level, don't get involved.
You're suggesting we all throw our hands up in the air and "let it be?" This is such a strange argument.
Other than more than they're currently making, what does "properly compensated" mean? Should we not use our votes to help decide that?
> Most likely, someone less qualified who is on the other side of the bell curve.
Damn. Sucks for the board who chose a winner the first time and couldn't find another winner.
> Business is complicated and the current policies were put in place with CAREFUL considerations of the trade-offs. If you don't understand them at a deep level, don't get involved.
You're suggesting we all throw our hands up in the air and "let it be?" This is such a strange argument.
Re: proper compensation - this is a good question, and I don't have the answer to it. Headhunters might.
Re: the rest - these are straw man arguments. I never made those claims.
My only point was that the OP shouldn't feel bad about not voting. If he's uneducated and unqualified to understand on a business' operations, which we all are because we have LIVES outside of stalking a corporation, he should leave the well paid people to make those decisions.
Just because you CAN do something doesn't mean you SHOULD. 99% of shareholders and employees within a company see a very very tiny sliver of what's really going on.
If you dont like a company for a particular reason, simply dont put your money into it.
Re: the rest - these are straw man arguments. I never made those claims.
My only point was that the OP shouldn't feel bad about not voting. If he's uneducated and unqualified to understand on a business' operations, which we all are because we have LIVES outside of stalking a corporation, he should leave the well paid people to make those decisions.
Just because you CAN do something doesn't mean you SHOULD. 99% of shareholders and employees within a company see a very very tiny sliver of what's really going on.
If you dont like a company for a particular reason, simply dont put your money into it.
Here's the thing. Whose trade-offs are we talking about?
Why should I not get involved if I understand those trade-offs? Everyone can always claim that there are trade-offs I don't understand about the great injustices of the world (hunger despite plenty food, magnitudes of inequality for equal amounts of work), why should I believe that?
Sure, I'll get someone from the other side of the bell curve. But I also saved a lot of shareholder value while doing that, and I am skeptical I will not win out.
Sure, I'll get someone from the other side of the bell curve. But I also saved a lot of shareholder value while doing that, and I am skeptical I will not win out.
If you understand the trade-offs and want to get involved, by all means. I'd be careful about thinking you understand trade-offs though. I'm sure you're not an idiot, but I'm more sure that you can't possibly understand the inner workings of a mega corp with 10,000 employees whose full time job involves running the company. If you did, you could create a 1 man startup and put them out of business.
Re: world hunger - this is a localization problem. Anyone claiming corn from Kansas should feed starving Ethiopians needs to spend time in the food industry.
I can't speak to shareholder value - I'm not a big believer that should ever be the motivation. If you're a passive investor, be passive. I put my passive money into funds because I need to keep up with the market, end of story. I put my active money into small companies I can manage and run.
Re: world hunger - this is a localization problem. Anyone claiming corn from Kansas should feed starving Ethiopians needs to spend time in the food industry.
I can't speak to shareholder value - I'm not a big believer that should ever be the motivation. If you're a passive investor, be passive. I put my passive money into funds because I need to keep up with the market, end of story. I put my active money into small companies I can manage and run.
This ... looks off to me.