Why are Index Managers being used in some asset classes?
In certain asset classes, the markets respond almost immediately to any changes in the investment environment. For example, when information is announced about US economic indicators that is especially disappointing or exceeding previous estimates, the domestic markets have adjusted for that news within a very short time frame, perhaps within hours. It is very difficult for investment managers to outperform the market after investment fees and transaction costs in efficient markets, except by luck. And the cost advantage in using index managers is significant. For example the costs to index the S&P 500 are typically one-tenth the cost of active large-cap management (including trading costs). For details on the investment fees for the Foundation’s Investment Program, click here.
