Must-Read: Joshua M Brown: The Woes of the Asset Managers

Must-Read: Passive diversified portfolios with an eye toward overweighting factors that have historically offered high returns is what nearly all investors should be doing.

Joshua M Brown: The Woes of the Asset Managers: “I would say that the pressure on fees and the transparency around what you pay vs what you get makes most of the sector uninvestable…

…Multi-million dollar ad budgets and the typical PR campaigns are failing to counter the power of the internet. The jig is up; investors have gotten too savvy (or skeptical, either way) for these businesses to bounce back as they used to…. Last week I sat with someone from Goldman Sachs who showed me what they’re doing within Smart Beta ETFs and it looks just like what everyone else is doing–multi-factor passive portfolios emphasizing value, small, quality and momentum. The difference is, Goldman is charging 9 basis points (9!). I had to be picked up off the floor. Goldman is going slash-and-burn for factor investing market share with a pricing structure that rivals what State Street, Schwab, Vanguard and BlackRock are charging for plain-vanilla index exposure…. I’m not sure how Smart Beta ETFs (or active managers mimicking these styles) will be able to hold the line on charging more than 50 basis points in a world where Goldman gives it away for free…

December 20, 2015


Brad DeLong
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