Did passive make an active decision?

This week’s Big Number is 3-12-20 — the day S&P Dow Jones, one of the largest index providers in the world, reportedly made the decision to postpone the rebalancing of its indices, originally scheduled to take effect prior to the open on Monday, March 23rd. 

Why is this remarkable? Because it marks the day passive investment management appears to have made a monumentally active decision. 

While we happen to believe passive management makes active decisions all the time, this one was particularly striking because it seems to have been made in direct response to recent “extreme market volatility.” We believe this reveals a critically important point about passive management, which now accounts for approximately $4 trillion of assets invested: 

Passive is not so passive after all. 

And without putting in place a disciplined framework for making active decisions, taking this action or making this type of decision could potentially cause undue risk to investors.