Why? How is Vanguard, an investment management firm which employees thousands of trained professionals, not qualified to cast votes on corporate governance? And in what sense is it "power collecting"?
Yes, this is an issue that is largely debated, and there are some very interesting conflicts of interest - just curious why you specifically think it's so bad.
My issue with it is that index funds don't compete on the quality of their contribution to governance. Many index funds are kind of fungible with similar low costs and performance relatively to the index they are supposed to track.
So how much money (and by extension votes) these index funds wield is not connected to the quality of their contribution to governance. It also seems to me like there isn't much accountability and visibility into how they are voting from the perspective of people deciding which index fund to invest in.
So you have people collecting massive amounts of clout, but no feedback loop ensuring that they lose that clout if they underperform at that particular task.
Also one of the talking points of passive investing is that the trained professionals aren't as qualified or smart as they think they are. Active management risk is something to be avoided. As some of these funds grow in size they wield significant power and introduce active management risk. You just don't see it because the fund still tracks the index.
I know that last bit is splitting hairs. Some active management always occurs otherwise how can companies function.
One question is why should a passive fund be treated differently from an active fund in terms of how they contribute to governance? One difference is some of these index funds are absolutely massive and wield more power then a typical active fund.
Yeah, definitely good points. Even with a department looking after voting, they're not nearly as "vested" in the results of their voting as something like an actively managed long value fund is.
I think you're missing the gist of his statement and also overlooking the word "almost"?
That being said, most of your definitions are still dependent on competitively pricing securities. A market maker who can't calculate reasonable theos won't be a market maker for long.
I think it depends a whole lot on what exactly you are market making and how you're trying to profit. Of course many desks take views as well, but mixing in prop positions doesn't change the essence of it: the MM is trying to make money off being available for other participants.
You can of course also learn some things about where to market is going in the course of this business, and many desks are able to piggy back on some flow information for their advantage.
There is both a visual and aural indicator. That being said, nobody (except Bonin) knew that the PF had his stick completely back until it was too late.
Yeah, it really is. If you haven't already, check out the full BEA report - it's incredibly comprehensive and leads to lots of "jumping off" points for further research.
Most "black box" quantitative hedge funds still use massive amounts of public data, even public data that might appear somewhat obvious. They absolutely develop new insights from that data.
Yeah, to clarify I was agreeing that those firms certainly pull and use that data, but not necessarily in the same traditional fashion that paper seems to imply.
Take this with a grain of salt as I don't work at any of the funds mentioned (but still in the industry), but why not?
Filings are subject to change due to errors, updates, etc. It's cheaper, easier, and less error prone to just scrape and overwrite data than search for any updates.
I may have been heavyhanded in saying that the firms are rescraping the entire universe of filings on a daily basis, but I guess my point here is that these numbers can very easily be skewed and are generally a pretty poor indicator of actual data access.
SEC EDGAR is terrible for a variety of reasons. It breaks, few things are truly standardized/normalized, etc. If you have the time and an invested interest there's no reason not to.
Filings are subject to change but they are restated, not modified in place. That said, anything goes on the site.
The only real reason not to scrape everything on a continuous loop is that there is a rate limiter in place, so you may end up impeding your intake of new data by loading yourself down with old jobs to handle.
Tradeworx is HFT. Yes, the premise of this paper is completely absurd. Drawing a line between overnight batch jobs for internal databases and performance is a quantum leap to say the least.
