The Boston Fed Enters the Active vs. Passive Debate

The video discusses the shift from active to passive investing, highlighting its effects on liquidity, redemption risks, and market volatility. It examines how passive investing reduces certain risks but may increase others, such as market volatility due to leveraged ETFs. The concentration of assets in large firms like Vanguard and BlackRock is also addressed, noting potential systemic risks.

What has been a significant trend in asset management over the past decades?

• A decline in mutual fund popularity

• An increase in hedge fund investments

• A shift from passive to active investing

• A shift from active to passive investing

How do ETFs contribute to reducing liquidity and redemption risks?

• By allowing in-kind transactions

• By promoting daily rebalancing

• By decreasing the number of securities

• By increasing the number of active investors

What is a potential downside of some exchange-traded products?

• They always track the market perfectly

• They can contribute to increased market volatility

• They are immune to market fluctuations

• They reduce the number of available stocks

What percentage of ETF assets do leveraged and inverse ETFs represent?

• About 25%

• About 2%

• About 50%

• About 10%

What is a concern related to the concentration of assets in firms like Vanguard and BlackRock?

• They have no impact on the market

• They could increase market stability

• They could lead to a duopoly

• They reduce investment opportunities

What is the potential risk if a large asset manager experiences an idiosyncratic shock?

• It could have no effect on the market

• It could lead to broader spillover effects

• It could stabilize the market

• It could only affect small investors

What is the combined asset value of Vanguard and BlackRock?

• $8 trillion

• $20 trillion

• $12 trillion

• $5 trillion