Bernstein Compared Passive Investing to Marxism; Now it’s Launching Two ETFs

Bernstein Compared Passive Investing to Marxism; Now it’s Launching Two ETFs

Bernstein Compared Passive Investing to Marxism; Now it’s Launching Two ETFs

Bernstein’s pivot toward ETFs includes stocks that are rated “outperform” by their research analysts and are highly rated in the firm’s quantitative alpha model.

Bernstein, the research shop that garnered a lot of attention earlier this year with a provocative report comparing passive investing to Marxism, has launched two new exchange traded funds based on its sell-side research. The Bernstein U.S. Research Fund (BERN) and Bernstein Global Research Fund (BRGL), issued under Exchange Traded Concepts’ platform, include stocks that are rated “outperform” by Bernstein’s research analysts and are highly rated in the firm’s quantitative alpha model.

“It’s technically a passive ETF, because it follows a given set of rules, but those rules are based on very active ingredients in the form of Bernstein Research,” said Robert van Brugge, chairman and CEO of Bernstein.

When asked about the Marxism paper, van Brugge responded, “You’ve got to separate the debate between active management and passive management from the debate about what is the better package—an ETF or a traditional mutual fund, because those two things are not the same. Even though ETFs have almost become synonymous with cheap and passive, they don’t have to be. That is precisely what we’re trying to do with this product. We’re trying to say ‘here’s an ETF that’s based on very active, fundamental, bottom-up research, i.e. the thing that underpins the entire belief in active management, yet it’s in ETF format.”

The Silent Road to Serfdom: Why Passive Investing Is Worse than Marxism argued the rise of passive investments means the mass of securities march in lock step, dictated by the index, when efficient capital allocation really depends on valuing an individual security on its own merits.


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