The rapid rise of passive investing has reshaped global markets, but JPMorgan Asset Management warns that a passive approach now is more vulnerable to risks. The asset manager points out that the composition of benchmarks have changed dramatically over the past 20 years.
“As a result, many of these benchmarks are no longer the ‘simple diversified access to markets’ that they may have been a decade ago. These benchmarks are now vulnerable to very specific risks inherent in today’s shifting economic and political tides,” says Zara Nokes, Global Market Analyst at JPMorgan AM.
For example, the US market’s share in the MSCI ACWI Index has grown substantially, from approximately 41% in 2008 to over 65% today. This means, the benchmark is not really global anymore.
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