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Implications of Passive Investing Dominance

July 24, 2025 • Posted in Equity Premium, Strategic Allocation

The value of holdings in passive (capitalization-weighted, index tracking) U.S. equity funds now exceeds that in active U.S. equity funds. In their May 2025 paper entitled “Passive Aggressive: The Risks of Passive Investing Dominance”, Chris Brightman and Campbell Harvey explore implications of the dramatic growth in passive investment strategies, including loss of diversification and mispricing. Using recent market data and results from past research, they conclude that:

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