Reblog: Bruce Greenwald Conference Notes: Lessons Learned Over 25 Years

Unusual challenges going forward in being a value investor, beyond active vs. passive or quant-based.

How the view of value investing has evolved over time.

One fact you should never forget: Investing is if you are judged relative to the market a zero-sum game. Asset by class by asset class, the average return to all investors in that asset class has to be the average return to all assets in that asset class. All the assets are owned by somebody, and the derivatives net out. If the asset class if up by 12%, the average investor is going to be up by 12%. What that means: If you’re going to be above average, somebody else has to be below average. That’s important because it seems good that more people are doing passive, leaving less competition. But it’s not true because you need someone to be stupid.

First reality: To the extent that the people who are doing index funds are people who populated the lower half of the investment distribution, it’s going to make your life harder not easier.

Second reality: Late cycle underperformance of value. Not something that should upset you. Today, we are in the middle of a fundamental change in the nature of profitability and in the nature of value generation that is related to a fundamental underlying change in society ad I think in various ways it has made value investing substantially harder.

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