Passive investment and equity market performance

Held on Monday, July 8th


  • Kevin James (FCA/LSE)

  • Elroy Dimson (Judge Business School)

  • Will Goodhart (CFA UK)

  • Vanessa Houlder (Financial Times)

  • Cornelius Schmidt (European Commission)



This discussion was prompted by a February research note, Does the growth of passive investing affect equity market performance? by Kevin James and colleagues at the Financial Conduct Authority. It raises several questions: the potential for active investment to undermine ‘the public good’; free-riding by passive funds on price discovery efforts of others; the decline of ‘deep’ engagement; and whether regulators should be concerned about the impact on market efficiency and corporate governance.

The growth of passive investing has undoubtedly created benefits for investors by lowering the cost of investing. Yet, active management also benefits investors by supporting the research, trading, and monitoring that is essential for equity markets to work well.

Kevin James is an economist at the FCA and co-investigator at the LSE’s Systemic Risk Centre. His recent projects focus on systemic risk, corporate governance and the efficiency of the IPO market. His research paper can be found here:

I am delighted that he has agreed to talk us through his conclusions. I am also delighted that we have four other panellists with different perspectives:

  • Elroy Dimson, Professor of Finance at Cambridge University and chair of the Centre for Endowment Asset Management at the Judge Business School. He is also an emeritus professor of finance at LBS.

  • Will Goodhart, chief executive of CFA UK, which provides investment management qualifications, and explains the investment profession to regulators and government.

  • Vanessa Houlder, Lex writer at the Financial Times, where she has worked since 1988. Awards include the LexisNexis tax writer of the year, as well as prizes for investigative journalism.

  • Cornelius Schmidt, part of the chief economist’s team at DG Competition of the European Commission. He also carries out research in the areas of corporate governance and banking.

This is an important issue, and it should guarantee a lively discussion. If you (or a colleague) would like to join us, please email or call the Centre on 0207 621 1056. As usual, there will be a sandwich lunch.

Sincerely yours,

Jane Fuller