ARK

Broad-Based Benchmarks Seem To Be Short Disruptive Innovation

The Misconceptions of Innovation and the Potential Perils of Index Investments
Massive flows of capital into strategies that track market capitalization-weighted indexes[1] seem to be concentrating risk in the global financial system.
Since the turn of the century, our research indicates that funds have been flowing at an accelerated rate into strategies that are looking more and more like one another. During the past 20 years, the sponsors of popular indexes like the S&P 500 Index and the Nasdaq 100 Index have shifted gradually from performance benchmarking[2] to passive-product licensing.[3] At the same time, in response to major risk-off environments like the tech and telecom bust 20+ years ago and the Global Financial Crisis 14 years ago, investors have become more risk averse and increasingly have “hugged” the benchmarks against which they are measured. As assets have moved from active stock selection to more passive rules-based strategies, what once was a reference measure of the market has become the market. With trillions of dollars tracking them,[4] we believe indexes no longer serve as reference portfolios and could be subjecting investors to lower than expected diversification in backward-looking strategies in the face of waves of disruptive innovation, causing real financial risk.

kompletter Kommentar vom 31.03.2022 auf ark-funds.com