passive investing

 A trader shouts for attention in the crude oil futures pit, 20 August, 2004, on the floor of the New York Mercantile Exchange.

A little less active than this

When it comes to passive or active investing – ie selective stock picks vs index tracking – there’s a big difference between companies based in emerging markets, and their counterparts in developed markets.

You might think that investors in emerging market companies would be in the “pick-and-choose” camp – index tracking is more common in developed markets, surely, and the companies are better known? Actually, it’s the other way round. Read more

If investors were asked to give a chunk of money directly to emerging market governments, most would refuse. But in the stampede towards low-cost, index linked investment in emerging markets, many will effectively end up doing just that, according to a report in Monday’s FTfm.

Arjun Divecha, chairman of GMO’s board and manager of three of its emerging markets funds, says GMO research shows that about 35 per cent of the constituents of the widely benchmarked MSCI emerging market index are companies that are owned or controlled governments and that these companies actually account for about 70 per cent of the earnings generated by that index. Read more