Hedge Funds Seen Gaining Market Influence in Passive Boom

(Bloomberg) The decade-long growth of cheap index-tracking funds is giving hedge funds an unexpected influence in setting market prices. As investors hand more of their money to passive fund managers and active stock pickers get sidelined, hedge funds’ heft is being magnified. Active fund managers warned Britain’s financial regulator that increased index-tracking is distorting markets by allowing hedge funds with “short-term” outlooks to set prices that don’t reflect fundamentals.

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