As I have recently seen quite a few articles about index hugging I thought it is something that would also interest you.
What is index hugging?
An index hugging investment fund is a fund that, even though the manager says he looks for his own investment ideas, mainly invests in companies that make up a large part of an certain index (the S&P 500 for example).
This means that if you invest in this fund you will pay higher fees than a cheap Exchange Traded Fund (ETF) but get the return of the index.
The regulators want to get rid of it
Index hugging has become so popular that the regulators in Sweden and Germany are investigating investment funds in order to get rid of index hugging funds with a high fee structure.
What has all this got to do with the Quant Value newsletter you may be thinking?
Quant Value is exactly the opposite
The investment ideas I recommend in the Quant value newsletter is exactly the opposite of index hugging.
Most of the companies are completely unknown (even to me before I start researching them), they are hidden gem small companies that are perfect for private investors like you and me.
Why is this important?
This is very important because you can only outperform the market index if your portfolio doesn’t look like it. As you know this has worked very well in Europe but less so in North America for the reasons I mention in the quarterly performance update.