Finance
The Great Index Apocalypse Comes for Bond Managers
Like stockpickers before them, fixed-income stars will face tougher competition from more sophisticated indexes.
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Investors are fleeing actively managed stock funds in favor of index funds. Active bond funds may be next.
Academics have understood for decades that stockpickers are unlikely to beat their benchmark indexes after fees, but investors’ reaction was delayed. They kept handing equity managers money. From 1993 to 2007, actively managed stock mutual funds boasted net inflows every year except one, according to Morningstar Inc.’s earliest available numbers.