A Revolutionary Take on Morningstar’s Style Box

“If we could first know where we are, and whither we are tending, we could better judge what to do, and how to do it.”

Abraham Lincoln

It must seem mighty strange for a blog about investment products to be ripping off quotes from the great emancipator, especially one that began his famous “House Divided” speech as the nation tore itself apart over the issue of slavery and states’ rights.  Then again, anyone working in the mutual fund side of the asset management business probably feels that it’s a pretty apt comparison to what’s going on in the business today.  Seems every armchair portfolio manager can only talk about underperformance by active managers and why passive index replicators charging low fees are the only way to go, a topic even the DOL enshrined in its recent Conflict of Interest rules.   Most are probably wondering if the situation could possibly get any worse as Morningstar says over $300 billion in AUM fled actively run funds for the year ending 8.31.

Now I’m sure you’re reaching for the world’s smallest violin thinking they have no one to blame but themselves after so many in the business got rich by running what amounted to closet index funds charging high fees which in turn helped spark the ETF revolution and brought the Feds down on them.  Picture the powdered wigs and finery of the French revolution but instead of aristocrats saying “let them eat cake” the masters of the mutual fund universe were saying “fees less than 1% and no 12b-1?  I never!” Continue reading