Decreasing returns to scale. Investing quote – 7.

Transcript

“Active management industry faces decreasing returns to scale: any fund managers’s ability to outperform a passive benchmark declines as the active management industry’s size increases. As more money chases opportunities to outperform, prices are impacted and such opportunities become more elusive.” Lubos Pastor. As in the research paper: “On the size of the Active Management Industry”, 2012