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The End of Indexing

Six structural mega-trends that threaten passive investing

By Niels Jensen

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The End of Indexing

Six structural mega-trends that threaten passive investing

By Niels Jensen

Jacket text

Index-tracking is the flavour of the day – it accounts for around one-third of the total US mutual fund market, and is still growing rapidly. Indexing appears to be unstoppable.

But, in The End of Indexing, investment veteran Niels Jensen presents a different vision. In a forthright and compelling examination of the investment landscape, Jensen argues that the economic environment we are entering will be unsuited to index-tracking strategies.

Jensen identifies six structural mega-trends that are set to disrupt investors around the globe:

1. End of the debt super-cycle
2. Retirement of the baby boomers
3. Declining spending power of the middle classes
4. Rise of the East
5. Death of fossil fuels
6. Mean reversion of wealth-to-GDP

In conjunction, these six themes have the potential to create conditions resembling a perfect storm that will result in low economic growth for decades to come. Investment techniques and methodologies – including passive investing strategies – that have worked so well in the bull market of the last 35 years will no longer deliver acceptable results.

As a new investment approach is called for, The End of Indexing provides investors with a guide to the challenging environment ahead and a warning about the future decline of index-tracking.

About the author

Niels Clemen Jensen has over 30 years of investment banking and investment management experience. He began his career in Copenhagen in 1984 before moving to Sherson Lehman in London in 1986. In 1989 he joined Goldman Sachs and became co-head of its U.S. equity business in Europe in 1992, a post he held until 1996, when he joined Oppenheimer to manage its European business. In 1999 he re-joined Lehman Brothers, now in charge of European Wealth Management. In 2006 he was appointed Director of Trafalgar House Trustees Limited, advising one of the UK’s leading corporate pension funds on its investment strategy.

Niels founded Absolute Return Partners in 2002 and is Chief Investment Officer. He is a graduate of University of Copenhagen with a Masters Degree in economics.

Reviews

An eye-catching title to grab your attention, and the book certainly does not disappoint. Niels Jensen avoids trotting out the old pros and cons of passive investing but instead pursues several big picture, important, interesting themes, focusing on structural mega-trends he says are set to disrupt investors around the world.

Nick McBreen, FT Advisor

How apt that I just finished “The End of indexing” by Niels Jensen in the midst one of those chilling tropical downpours in Asia. It is indeed a highly readable rainy-day read that pours cold water on the future of passive investing. Niels takes the reader on a comprehensive tour of some depressing megatrends affecting the global economy and asset markets. You don’t even need to buy into every aspect of these to sympathise with his intelligent interpretations. Niels’ vast market experience shines through in his clear translation of trends into investment strategies. His conclusion — that passive investment strategies expose investors to the wrong type of risk at the wrong side of the megatrends, is accompanied by some convincing suggestions regarding where to maintain risk exposures.

Gabriel Sterne, Head of Global Macroeconomics, Oxford Economics

The lessons learned in the stupendous global bull market of the last 40 years will serve us very poorly in the years ahead. With The End of Indexing, Niels Jensen offers a treasure trove of market insights, presented in a global context, that will help readers reach their goals despite the coming headwinds.

Rob Arnott, founder and CEO of Research Affiliates

Niels Jensen is particularly well versed in not only the trends of the markets, but how to take advantage of them. I have worked closely with Niels for over 15 years and I rank him as one of the most astute investors I know. His book, The End of Indexing, it is not only a remarkable study of market trends and economic reasoning, it is done with his inimitable style and grace in writing that makes everything he writes so readable and immediately come to the front of my reading list when it shows up in my inbox. This is a book you’re going to want to read more than once. And every time you do you will learn something new and important.

John Mauldin, five times bestselling author and chairman of Mauldin Economics.

So often, it seems that analysts and investors are aware of important long-term issues but choose to discount them, and focus instead on short-term ones, that seem more concrete – retaining only a vague sense of concern that they might be missing something. Keynes taught us the dangers of being myopic. So, for example, it is important to consider both short-term ‘momentum’ and long-term ‘value’ when investing: they are, as it were, two sides of the same coin. Niels’ book, and the approach he takes to separating out key long-term structural issues and hammering home their importance, may help to redress the balance. And it may well help a number of investors to improve upon their own approaches.

Sushil Wadhwani, Founder of Wadhwani Asset Management

Media coverage

From Shares Magazine:

‘The end of indexing’ by Niels Jensen Fund manager Jensen argues that six mega-trends will disrupt the status quo leading to decades of low economic growth…

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From forbes.com:

If you think holding an S&P 500 Index fund through thick and thin will produce attractive long-term results, you might feel otherwise after reading this well-researched, common-sense book.

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From Money Life Show:

“I thought this book was fascinating… indexing is taking over the world.”

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From Stocks & Commodities:

Index tracking accounts for around one-third of the total US mutual fund market and is still growing rapidly. However, this author argues that the economic environment we are entering will be unsuited to indextracking strategies. Jensen identifies six structural megatrends that are set to disrupt investors around the globe, including: the end of the debt… Read more »

Read More…

From Stocks & Commodities:

Index tracking accounts for around one-third of the total US mutual fund market and is still growing rapidly. However, this author argues that the economic environment we are entering will be unsuited to indextracking strategies. Jensen identifies six structural megatrends that are set to disrupt investors around the globe, including: the end of the debt… Read more »

Read More…

From Money Week:

The End of Indexing is a thought-provoking read. At the very least, it will force you to reassess your investment strategy and should dissuade you from assuming that the current bull market will last forever.

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From MoneyWeek:

The End of Indexing is a thought-provoking read. At the very least, it will force you to reassess your investment strategy and should dissuade you from assuming that the current bull market will last forever.

Read More…

From citywire.co.uk:

Today I would like to share one of the key conclusions I make in my new book The End of Indexing; that ageing of society is going to have a massive impact on all of us in the years to come. Across the OECD, 150 million people will retire in the next 15 years –… Read more »

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From MarketWatch:

Indeed, passive, indexed investing will at best deliver 0%-5% annually (inflation-adjusted) over the next few decades. Returns for the U.S. are at the lowest end of that forecast range, partly because U.S. equities are so richly valued at present, and partly because the wealth-to-GDP ratio is more out of sync in the U.S. than it… Read more »

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From FT Adviser :

An eye-catching title to grab your attention, and the book certainly does not disappoint. Niels Jensen avoids trotting out the old pros and cons of passive investing but instead pursues several big picture, important, interesting themes, focusing on structural mega-trends he says are set to disrupt investors around the world.

Read More…

From ValueWalk's ValueTalks hosted by Raul Panganiban :

In this episode we discuss his recent book, The End of Indexing: Six Structural Mega-Trends That Threaten Passive Investing…. I encourage everyone to check out his fantastic newsletters and also his book, “The End of Indexing: Six Structural Mega-Trends That Threaten Passive Investing”.

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From Master Investor:

… This book is essential reading for anyone interested in getting a head start on the investment trends of tomorrow… Perhaps the most interesting trend covered is the demographic phenomenon of the retirement of the baby boomers. The book concludes with the author discussing the various types of risks involved in investing and explaining how… Read more »

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From Informed Choice Radio:

My guest on the show today has written an excellent new book which takes a look into the future for investors, predicting six structural mega-trends that threaten passive investing.

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From Seeking Alpha:

Niels Jensen’s The End of Indexing: Six structural mega-trends that will threaten passive investment (Harriman House, 2018) is a wonderfully thought-provoking book. It tackles macro issues that threaten not only passive investment but much active investment as well.

Read More…

Contents

About the author
Acknowledgements
Preface

Introduction
1. The Declining Everything
2. The Big Conundrum
3. The End of the Debt Super-Cycle
4. The Retirement of the Baby Boomers
5. The Declining Spending Power of the Middle Classes
6. The Rise of the East
7. The Death of Fossil Fuels
8. Mean Reversion of Wealth-to-GDP
9. The Perfect Storm
10. How to Improve Productivity
11. What's Next?
12. Why Index Investing Will Dwindle

Bibliography



Published: 26/03/2018
Edition: 1st
Pages: 242
Formats: hardback - ISBN 9780857195494
ebook - ISBN 9780857195500
Media enquiries

If you’d like to get in touch with the author for interview or comment, or you’d like a review copy of this book, please contact us at pr@harriman-house.com or call +44 (0)1730 233870.

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