The author then turns to ‘passive’ index funds and finds that both these phenomena are even more extreme among the indices tracked by these funds. She argues that far from being ‘passive’, index investing is better understood as a form of delegated active management, where the delegee is the index creator rather than the fund manager. Many ETFs are found to track indices that they or their affiliates create. Even controlling for other factors, these funds have, on average, higher expense ratios.
1 Robertson, A.Z., 2019, ‘Passive in Name Only: Delegated Management and ‘Index’ Investing’, Yale Journal on Regulation.
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