Equity Markets, Valuation, and Analysis

CHAPTER 20Pooled Investment Vehicles

Joseph McBrideieler

Head of CRE Finance, Trepp LLC, Adjunct Assistant Professor of Finance, Fordham University

Michael Painieler

Managing Director, Arcview Capital, LLC, Independent Financial Consultant

Andrew C. Spieler

Robert F. Dall Distinguished Professor, Frank G. Zarb School of Business, Hofstra University

INTRODUCTION

Pooled investment vehicles (PIVs) allow investors to aggregate investment funds to take advantage of the associated economies of scale in equity, fixed income, commodity, and derivative markets. Both active equity investors, looking to outperform a specific benchmark, and passive investors, simply tracking the return of an index, use PIVs. Many retail and institutional investors rely heavily on the almost endless combination of investment options provided by PIVs to meet their specific risk and return objectives. Today, PIVs cover virtually every conceivable style, factor, geography, company size, and management approach, as well as various environmental, social, and governance (ESG) matters.

According to the Investment Company Institute (2019a), equity PIVs experienced a global explosion in growth in recent years, from $11.9 trillion at the end of 2010 to $19.9 trillion by the end of 2018. Various long-term and cyclical macroeconomic factors such as increased competition, strong growth in passive investment management, and downward pressure on fees and expenses fueled this growth.

This chapter provides an overview of ...