I could be accused or being optimistic to the point of naivety but I draw hope from 5 things that are at least moving in the right direction of democratising Wall Street.
– price/fees competition. Funds that sell high cost active alpha have to justify their fees against low cost passive beta. They increasingly quote net of fees. Some are choosing to compete on both fees and performance to deliver what we call low cost alpha.
– wealthy people giving back. Some of that maybe more PR than real (ie a pledge has to be followed up with cash) but motivation matters less than the end result It is positive if some wealthy people who want to be seen to be doing the right thing are shamed into actually delivering. Others know that a hypercapitalist push to increasing inequality may actually damage their self interest.
– growing adoption of impact investing. This replaces the either profitable OR doing good paradigm with profitable AND doing good. The key benefit is getting off the treadmill of always raising more philanthropic capital.
– faster exposure of damaging business models. Thank you Internet! It is now so easy to write online and it only takes one person to expose the bad stuff and maybe somebody else with a lot of followers to give that a shout out. For example, many more people now understand that even if it is free it can harm your wealth.
– Follower model may disrupt fund management. The idea – like most disruption – is simple. You follow somebody’s trades and give them a share of the profits. This enables a new breed of fund managers to invest first then gather assets later ie the exact opposite of how it works today. The key to success is enabling both parties to make money even if the number of trades is very low.
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