At the Money: Avoid Closet Indexing

Masters in Business

Bloomberg

Business, Entrepreneurship, Investing

4.4 • 2.2K Ratings

🗓️ 17 April 2024

⏱️ 19 minutes

🔗️ Recording | iTunes | RSS

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Summary

Are your expensive active mutual funds and ETFs actually active? Or, as is too often the case, are they only pretending to be active? Do they charge a high active fee but then behave more like an index fund? If so, you are the victim of closet indexing.

Andrew Slimmon, Managing Director at Morgan Stanley Investment Management, leads the Applied Equity Advisors team and serves as Senior Portfolio Manager for all long equity strategies. He speaks with Barry Ritholtz about the best ways to avoid the funds that charge high fees but fail to provide the benefits of active management.

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Transcript

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0:56.7	strolls the pretender he knows it all his hopes and dreams begin and end there.
1:10.0	What if I were to tell you that many of the active mutual funds you own are really expensive passive vehicles?
1:19.0	It's a problem called closet indexing and it's when supposedly active funds own hundreds and
1:26.4	hundreds of names making them look and perform like big indexes minus the
1:32.3	low fees.
1:33.6	None other than legendary stock picker Bill Miller has said
1:37.4	closet indexers are killing active investing.
1:42.2	That's from the guy who beat the S&P 500 index 15 years in a row.
1:47.0	I'm Barry Ritoltz and on today's edition of At The Money, we're going to discuss how you can avoid the scourge of overpriced
1:56.2	closet indexers. To help us unpack all of this and what it means for your
	...

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