The tracker fund was made up of stocks weighted according to their share of the market, thus raising the question as to whether this is an appropriate strategy to build passive investment funds.
The majority of passive tracker funds are constructed this way. A tracker aims to mirror or “track” the performance of any of a number of worldwide stock market indexes, such as the FTSE 100.
A FTSE 100 tracker is proportionally invested into the 100 companies in the index based on how large those companies are – their market capitalisation. But the new research, conducted by Cass Business School and sponsored by Aon Hewitt, questions whether there is a better way to construct indices and the funds that track them. (more…)