With $431 billion in equity and bond index funds, competition has heated up and to attract investors, companies have brought fees down. And those weakened margins are causing some firms to turn to new indexes that they can price higher: enhanced index funds.
Even though fund companies say these enhanced indexes can beat the broader market, Vanguard founder Jack Bogle, writing in Forbes, calls that pure folly. He notes that of the 355 actively managed funds that have been available for the past 36 years, only three have outpaced the market. And the same is true for enhanced indexes, Bogle says.