The Best Investment Writing Volume 5: Peter Chiappinelli, GMO – The Passive Aggressive Agg, Revisited

The Meb Faber Show - Better Investing

The Idea Farm

Business, Investing, Management

4.7 • 938 Ratings

🗓️ 8 October 2021

⏱️ 15 minutes

🔗️ Recording | iTunes | RSS

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Summary

Last year we brought listeners the entire volume of The Best Investment Writing Volume 4, in audio format, right here on the podcast. Listeners loved it, so we’re running it back again this year with The Best Investment Writing Volume 5. You’ll hear from some of the most respected money managers and investment researchers from all over the planet. Enough from me, let’s let Peter take over this special episode. To read the original piece, click here ----- Follow Meb on Twitter, LinkedIn and YouTube For detailed show notes, visit mebfaber.com/podcast To learn more about our funds and follow us, subscribe to our mailing list or visit us at cambriainvestments.com ----- Today’s episode is sponsored by The Idea Farm. The Idea Farm gives you access to over $100,000 worth of investing research, the kind usually read by only the world’s largest institutions, funds, and money managers. Join today and get access to quarterly CAPE ratios, an excel quant backtester and the entire research library. Learn more about your ad choices. Visit megaphone.fm/adchoices

Transcript

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0:00.0	Welcome podcast friends we have a fantastic episode for you today.
0:11.1	Last year we published the Best Investment Writing, volume four, we offered authors the opportunity
0:16.6	to record an audio version of their chapter to be released as a segment of the podcast and
0:20.9	listeners loved it.
0:21.9	This year, we're once again bringing you the entire
0:24.4	volume of the best investment writing, volume five in podcast format. You'll hear from some
0:29.7	of the most respected money managers and investment researchers from all over the world.
0:34.7	Enough for me, let's get to our guest and let them take over this special episode.
0:38.7	Hello, this is Peter Chippanelli, portfolio strategist on the asset allocation team of
0:44.8	GMO is an institutional money manager founded in 1977 by amongst others, Jeremy Grantham.
0:52.4	To learn more about our firm, check us out at gMO.com.
0:58.0	Today I'll be reading a piece entitled, The Passive Aggressive Agg. Passive Investing in Bonds Today. the passive investing in bonds today turns prudence on its head.
1:07.0	It is well understood among investors that there have been massive flows out of active equity funds into passive vehicles, such as
1:15.8	index funds and EDFs. What has not been as widely appreciated is that the same thing is happening
1:21.9	in fixed income.
1:23.0	Nearly 40% of all core bond funds today
1:27.0	are passively managed, up from 16% only 10 years ago.
1:32.0	One index in particular is vacuering up these assets, the
1:35.9	Bloomberg Barclays U.S. aggregate index, commonly known as the Ag. We think this
1:41.9	massive movement to the Ag is ill-timed and is turning the very concept
1:46.5	of prudence on its head because the index suffers from the following problems. First, its construction is fundamentally flawed.
1:56.4	Next, it suffers from deteriorating corporate credit quality at a concerning point in the market
	...

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