Dumb Beta and the Passive Explosion

Featuring Vincent Deluard, CFA

Taking on the smart beta crowd, renowned global macro strategist Vincent Deluard, examines the long term impact on markets of years of central bank liquidity and the rise of passive investing. In conversation with Brent Johnson, Vincent spells out his biggest macro call for the next five years, with the closing of the valuation gap between US assets and the rest of the world. Filmed on August 2, 2017, in San Francisco.

Published on
21 August, 2017
36 minutes
Asset class
Currencies, Bonds/Rates/Credit, Equities


  • DS

    David S.

    22 4 2018 23:25

    0       0

    One of my favorites interviews, of which there are many, because of the keen insights and fantastic humor. Brilliant. DLS

  • DS

    David S.

    27 2 2018 21:39

    0       0

    The European voters are a little like Mario Draghi in that they were able to see how a USA populist government would perform. After watching the Trump presidency, they did not vote the populist in. This can turn if the immigration question gets back on center stage. We will see how the Italian elections go in early March. DLS

    • DS

      David S.

      6 3 2018 20:12

      0       0

      Looks like the immigration question is still a major concern on both sides of the pond. DLS

  • DS

    David S.

    27 2 2018 00:12

    0       0

    Excellent interview. I was out for several months and missed this interview. Many thumbs up. DLS

  • CS

    Chris S.

    8 9 2017 08:41

    3       0

    Very reasonable thoughts from Vincent. Personally I think the 'passive bubble' discussion is a little overdone and should be more differentiated. Not all passive is bad and not every ETF is passive. But I like Vincent's view on the lack of shareholder activism and its consequences on the management morale of listed companies. For me this is probably the strongest argument against passive investing.

  • DF

    Dave F.

    25 8 2017 16:44

    5       0

    Tim H.

    I think your comment misses the mark. Indexation works for a period of time until it does not. Liquidity will be a massive issue at some point and that will make the indexing crowd look a bit foolish. We are not dealing in free markets compliments of The Fed and that simply distorts everything.

    Christopher Cole and Steven Bregman highlight objective data points regarding this phenomenon and make a convincing case as to why indexation could be the next bubble.

    • DS

      David S.

      27 2 2018 00:08

      0       0

      I believe that Mr. Deluard is discussing only large, highly traded ETFs for part of a portfolio and not a myriad of smaller ETFs.

  • JK

    Jeff K.

    25 8 2017 12:00

    5       0

    A smart young man! Love it when you come up with names that aren't (yet?) well known

  • CC

    Charnes C.

    24 8 2017 21:24

    0       2

    Not spamming...just putting out the word. Great interview. I'm trying to wrap my head around markets, cycles and how they relate to each other. I created a website to connect with others in the investing community. I am not selling anything and simply want to throw my ideas "out there" for critic / comment. As a practicing physician, no one around me seems the least bit interested in markets, debt, cycles, money, gold, etc. Thanks in advance. https://www.golddowcycles.com/

    • MS

      Matt S.

      29 8 2017 08:25

      2       0

      and yet you keep spamming - everywhere

  • KK

    Kevin K.

    24 8 2017 18:12

    1       0

    Whats the best way to short European high yield?

    • AM

      Andrew M.

      24 8 2017 20:53

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      i dont think there are a lot of inverse etfs for european HY - there are lot for the US, but not many for europe it seems.

      of course you can short bonds, but your best bet as a retail investor may be to short an etf - iShares and SPDR both have popular etfs. still, it may be best to wait a while; both have done well of late as euro growth picks up, and beware a strengthening euro vis-a-vis USD if youre in the US. good luck!

    • VD

      Vincent D.

      6 10 2017 22:10

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      Kevin, check IHYG on the LSE, no ETF exist for that in the US

  • SA

    Sreenath A.

    24 8 2017 13:41

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    Read article by Ben Carlson - http://awealthofcommonsense.com/2017/08/how-to-get-rich-with-alternative-investments/

    He refers to a BCG report on managed assets. Passive investing is still a lot lower as a percentage of total assets (6%) versus 23% for managed assets. Completely debunks a lot of myths about passive investing! I guess the ones with the loudest voice get to be heard. Passive investing will continue to steal market share from active managers for years to come and the complaints about that will not end!

  • AB

    AJ B.

    23 8 2017 21:31

    0       0

    Never get caught on tape uttering "goldilocks"

  • TH

    Tim H.

    23 8 2017 21:28

    5       2

    Looks like fund managers are queuing up to attack passive investing one after another - perhaps they should concentrate on improving their performance instead, might be a start.

    • AM

      Andrew M.

      24 8 2017 21:00

      3       0

      many managers are crap, but to attack them all in the current environment is absurd. the sharpe ratio of the S&P 500 YTD until June was 3.5. short of buying FANG stocks which is antithetical to sound investing, I don't see how they could outperform an index? different markets are different of course, but the same tenet holds... wait until the next crash ;)

  • RI

    R I.

    22 8 2017 03:58

    2       0

    Spot on.

  • PU

    Peter U.

    21 8 2017 19:08

    2       5

    not very revealing

  • Sv

    Sid v.

    21 8 2017 16:09

    12       8

    Europeans are old, and conservative, they vote, and they do not vote for revolutions. They vote for comfort. This explains why Europe is dying.

    • AH

      Andreas H.

      21 8 2017 19:14

      20       1

      ...at least we die in comfort ;-)

    • MS

      Matt S.

      29 8 2017 08:22

      3       4

      agreed - Europeans deserve the Hell that awaits them in the coming years as more and more unchecked migrants from Africa flood in and destroy the little comfort nests that Europeans have built for themselves. Macron is a travesty. And they voted Merkel back? It boggles the mind.

    • DS

      David S.

      27 2 2018 00:23

      0       0

      Sorry Sid v. I think that Europe will be just fine. They have their problems and we have ours. The European politicians get them into many problems, just like ours do. Enjoy the differences. DLS

  • RM

    Richard M.

    21 8 2017 12:34

    12       1

    Very good discussion! Enjoyed hearing an up to date talk on the European perspective (I think it's time to get Pippa back on).