Policymakers urged to implement framework to address active and passive index investing blur

CFA Institute report

The CFA Institute has called on policymakers and firms to implement a framework designed to fix confusion caused by increasingly active index-based investment strategies.

The institute has proposed that index strategies should be categorised by the extent of active management they incorporate beyond traditional market-cap weighting.  This lack of clarity stems from newer index-based strategies, such as smart beta ETFs and direct indexing which introduce more active decision-making into investors' portfolio construction, a departure from traditional division into active and passive management techniques.  In its recommendations to policymakers, the CFA Institute urged those with regulatory or legislative power to create and implement "a comprehensive re...