Should passive investing be encouraged, for the time being, or are we perhaps already at a point where discouraging passive investing would actually be more appropriate? In this article,1 we argue that, at the very least, the proponents of passive investing should seriously address the broader implications of their approach.
First, they should acknowledge that large-scale active investing is a prerequisite for passive investing, as well as for an efficient allocation of capital. Second, they should describe how large-scale passive and large-scale active investing can coexist in a macro-stable equilibrium. Third, they should identify who should invest actively in this equilibrium, as well as their own roles and responsibilities.
These considerations might be called the sustainability dimension of passive investing. Interestingly, investors increasingly demand that the companies in which they invest adhere to sustainable business models. Perhaps the sustainability of their own investment philosophy ought to be put to at least the same level of scrutiny.
1Blitz, D.C., 2014, ‘The dark side of passive investing’, The Journal of Portfolio Management.
This report is not available for users from countries where the offering of foreign financial services is not permitted, such as US Persons.
Your details are not shared with third parties. This information is exclusively intended for professional investors. All requests are checked.
Robeco Institutional Asset Management B.V. (DIFC Branch) is regulated by the Dubai Financial Services Authority (“DFSA”) and only deals with Professional Clients and Market Counterparties, and does not deal with Retail Clients as defined by the DFSA.
Neither information nor any opinion expressed on the website constitutes a solicitation, an offer or a recommendation to buy, sell or dispose of any investment, to engage in any other transaction or to provide any investment advice or service. An investment in a Robeco product should only be made after reading the related legal documents such as management regulations, prospectuses, annual and semi-annual reports, which can be all be obtained free of charge at this website and at the Robeco offices in each country where Robeco has a presence.