Do Index Fundsters Face Growing Headwinds?
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Tuesday, November 13, 2018

Do Index Fundsters Face Growing Headwinds?

Fundsters running index funds face growing investing headwinds, at least in the eyes of one of the six chief investment officers at a top active mutual fund shop, T. Rowe Price.

David R. Giroux
T. Rowe Price
Chief Investment Office of U.S. Equity and Multi-Asset, Head of Investment Strategy
David Giroux, T. Rowe's chief investment officer of U.S. equity and multi-asset and head of investment strategy, says that passive investing faces "a secular challenge ... over the next five to ten years." Giroux shared this tidbit and more this morning at the Baltimore-based fund firm's 2019 Global Market Outlook press briefing at a Convene in New York City. Reporters packed in after breakfast to hear top T. Rowe investment executives, including: Giroux; Alan Levenson, chief U.S. economist; John Linehan, CIO of U.S. equity value; Andy McCormick, head of U.S. taxable bond; and Justin Thomson, CIO of international equity.

The challenge Giroux sees for passive management in the coming years, he says, is that the "number of attractive industries and companies is shrinking," as more and more industries (think cable, retailers, advertising) face painful shifts. Passive managers, by virtue of tracking indexes, have to stay invested in industries and companies that face such headwinds (while active managers like T. Rowe can avoid them).

"Secular risk is growing," Giroux says.

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