Is Indexing Doomed? Financial Leader Believes So
The End of the Era of Mutual Funds: Index funds -mutual funds that track an "index" of dozens or hundreds of companies- have been a popular investment for decades. With nominal expense ratios and built-in diversification, they offer a strong basis for a retirement portfolio. But Niels Jensen, the UK-based founder of Absolute Return Partners, has written a book predicting that mutual funds will soon lose their luster. By analyzing long-term macroeconomic mega trends, he has come to the conclusion that mutual funds will go belly under. The Debt Super-cycle May Stop Churning: Borrowing -particularly on a margin- has led to unparalleled standards of living. As TV dad Archie Bunker once said, "[c]redit is the only thing that stands between us and Communism." But as the sovereign debt of developed nations is untenable, as some economists predict will happen soon, the entire global financial system will have to be restructured. This means that the dominance of mutual funds will also end, and leads us to Jensen's next salient point... The Rise of the East: With the ascendancy of the BRICS countries (Brazil, Russia, India, China and South Africa), some are doubting the centuries-long dominance of the Anglo-American economies and their allies. Though the BRICS nations still have multiple millions of people living on wages less than $2 a day, which means they also have more room to grow. China, in particular, has been a