"We achieved superior risk-adjusted returns" as an excuse for sovereign fund underperformance is nonsense. PE (depending on how levered it is) inherently has lower volatility than buying public stocks.

If your fund gets consistently lower returns than if you had just stuck everything in a 60/40 portfolio, the whole endeavor has failed.

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triceratops 6 hours ago | parent [-]

I really like the ideal of just chucking it all in VTI (or, since it's Canada, some other equivalent). But does it still work at that scale? Or does the fund exert its own gravitational field on the index in question?

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AnthonyMouse 6 hours ago | parent | next [-]

The gravitational field of indexes that large is one of the reasons why it works. The stock price of a company will generally increase when it's added to a major index because there are now so many more people trying to buy it as part of the index.

The risk is nominally that if you ever wanted to move a fund that large into some other investments, the act of selling would lower the price of the assets in the fund. But that's what happens no matter what you invest that amount of money in. But then widely distributed whole-market indexes would tend to mitigate that.

The real problem with this is that it disconnects what people invest in from the fundamentals of the companies. Promising companies don't get as much investment if they're not in an index, and mismanaged companies get too much if they are.

	▲	triceratops 2 hours ago \| parent [-]
		> The gravitational field of indexes that large is one of the reasons why it works I'm confused because my question was whether a sovereign wealth fund could move an index by too much. Not about the issues with index investing (which IMO are mostly overblown).

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caminante 6 hours ago | parent | prev [-]

Not Canada, but Bank of Japan and the equivalent JP pension fund have juiced the crap out of domestic JP stocks with ETF purchases.