Apollo Global Management and Citadel, giants in the world of active investing, are both pointing out risks that exist as passive funds gain in prominence.
At Apollo, the view is that the hidden costs of the passive-investing juggernaut include higher volatility and lower liquidity. Ken Griffin’s Citadel, meanwhile, says regulators undervalue active managers’ role and are crimping their growth. US exchange-traded funds — a bastion of passive investing — have record net inflows of $913 billion this year, and combined assets exceeding $10 trillion, thanks to the buoyant US stock market.