(Bloomberg) — Elon Musk and Cathie Wood criticized passive investing in a Twitter thread, weighing in on a controversial and unresolved debate.
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Their dialogue was sparked by enterprise capitalist Marc Andreessen, who mentioned companies like BlackRock Inc. have outsized voices in lots of firms due to the voting energy of their secure of passive index trackers.
Musk, chief govt officer of Tesla Inc., replied that passive investing has “gone too far.” Wood, who based Ark Investment Management LLC, took up the dialog, noting that traders in S&P 500 trackers would have missed out on large beneficial properties in Tesla earlier than it was included in that index.
“History will deem the accelerated shift toward passive funds during the last 20 years as a massive misallocation of capital,” Wood mentioned.
Wood is likely one of the most high-profile energetic managers however has suffered a bruising 12 months, along with her flagship ARK Innovation ETF slumping virtually 45%. Tesla, in the meantime, is among the many main corporations the place the likes of indexing pioneer Vanguard Group or BlackRock are among the many prime shareholders.
The debate over energetic and passive funds has raged for many years. Active managers tout their efficiency potential and function in creating the environment friendly markets tracked by passive funds. Others say energetic types wrestle to beat indexes constantly and levy excessive charges in contrast with low-cost trackers.
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