What is clear is that while tracking error is indeed a prime consideration for index fund investors, the tracking error of international funds that use FVP must be taken with a grain of salt. And after watching the video or reading the blog or journal article, just this one process (FVP) by itself should debunk any notion that a monkey could run an index fund! (No offense to my primate friends, btw. . . .) But if accounting for the impact of global volatility on thousands of security prices worldwide isn’t enough, just imagine how a monkey might handle the volume of daily cash flows, trading on a multitude of platforms, or ensuring that a fund’s key characteristics align with its targeted benchmark. Been to a zoo recently?
So is there a monkey running my index fund? Not a chance!
All investing is subject to risk, including the possible loss of the money you invest.
This article was written by Chris Philips, CFA, leader of the Corporate Investment Only Central client service team in Vanguard Institutional Investor Services.