| Dec 20, 2021 | Michael Benigno
How the Invention of Index Funds Changed Finance
Fifty years ago, a group of financial professionals went against Wall Street’s status quo and developed a new way to invest in a portfolio of stocks with lower fees. Economist and Nobel laureate Eugene Fama, Vanguard Group founder Jack Bogle, and several other key financial players risked their careers by laying the foundation for this new wave of passive investing. Now, it makes up $20 trillion of today’s markets—the equivalent of the entire gross domestic product of the U.S.
Financial Times’ global finance correspondent Robin Wigglesworth unveiled the secret history of the index fund revolution in a Gabelli School Centennial Speaker Series event sponsored by the CFA Society New York, the Gabelli Center for Global Security Analysis, and the Museum of American Finance. Also the topic of his book, Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever, Wigglesworth recounted how passive investing reshaped the market and explained that it’s part of the investment ecosystem.
“I think index funds are essentially raising the bar for active managers and pushing mediocre ones out and forcing the remainder to continually improve,” he said, “thereby actually increasing the market’s overall vibrancy.”