Merrill: Passive hedge fund strategies will emerge

Many of you are believers in passive investing. And why not? The benefits of index funds and ETFs are clear. What about hedge funds? Merrill Lynch has put out a press release that argues that passive hedge fund techniques could result in similar returns at lower cost. It thus predicts this technique will develop soon. Why, I'll bet Merrill Lynch has a couple of products readying for launch right now. One way to passively invest is to use liquid assets to replicate some kind of index. Another way would be to develop a rules based approach that would mimic common strategies. Merger arbitrage might be an example. The real benefit will be in the fee structure, which will have to be low enough to offset the left-on-the-table gains. If there are any. This can be seen as another sign of a maturing industry.

For more on this:
- Here's Merrill's release
- Check out Merrill's blockbuster earnings. Article