Time to equal weight

CONTRARIAN INVESTOR

One of the more amusing aspects of the ongoing dispute between fans of indexing and active fund managers is the row over momentum biases within large indices such as the FTSE 100.

The active guys and gals love to taunt the indexers with the claim that as bull markets power ahead, the big indices become stuffed full of expensive stuff which will likely tank in a pull back. The favourite line is that at some point in the mid 1980s Japan was a colossal component of the MSCI World index - if you had have bought the index you would be a very sorry investor over 20 years later! The underlying argument here is active fund managers reckon they justify their higher fees by their judicious control of sector and style risk, by making judgments based on fundamentals and marke...