The move from active investing to passive has been a hot topic lately. Fund flows show that investors are voting with their feet. The news media has been all over the story. The Wall Street Journal has done a big spread on it; Bloomberg has covered it extensively as well.
Bill Miller, the legendary stock picker at Legg Mason Capital Management who beat the Standard & Poor’s 500 Index for 15 consecutive years, has an intriguing theory about why investors have been abandoning active investments. Although some people see passive investing as a form of active investing, he sees the precise opposite phenomenon: Active fund managers are often nothing more than high-priced closet indexers.
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