Do Market Inventory Funds Really Make Sense?
7 Pages Posted: 4 Oct 2013
Date Written: May 31, 1978
There is some threshold level of competence among multiple active managers above which an inventory fund will be superior to an index fund. When active managers' trades are genuinely valuable, however, a better approach is to treat them as sources of estimates, not transactions, combining several estimates to obtain a single summary estimate, and discarding the inventory fund in favor of an independent active portfolio.
Keywords: market inventory funds
JEL Classification: G10, G11
Suggested Citation: Suggested Citation