The mother of all bubbles: How lack of value, risk and growth alignment created the biggest risk yet

Inconsistent measures have caused more trouble

We are all very much aware of the significant growth behind passive and ETF investing. Unjustifiably high fees and ease of access has driven trillions into passive index tracking funds over the last decade – perhaps justifiably so.

For years 'active managers' have over-charged clients for sub-par, over-diversified, closet-tracking investment strategies which resulted in a general scepticism about the benefits of active management. While poor manager selection and bad execution have further compounded problems, perhaps the biggest offender has been academia and specialists, and their lack of alignment. Too many theories, too many relativity? In 1952, the introduction of Modern Portfolio Theory (MPT) formalised the benefits of diversification and validated a backward-looking measure - volatility or standard devi...