Moving to Index Funds

The Philadelphia Inquirer today reports: “For a major union, a new label: Index-fund investor.” The article states that “[e]ffective June 30, Local 56 fired private money-management firms in Boston, Chicago, Milwaukee, Philadelphia and other cities, and replaced them with low-cost index funds from Malvern-based Vanguard Group.” The labor union is reportedly making the move because they “figure they can save $1.6 million a year through lower management and trading fees – plus many millions more from what they expect will be higher investment returns in the future, since indexes tend to outperform private money managers.” The article states that Anthony R. Cinaglia, president of the labor union, “is crusading to persuade other U.S. unions, which together control an estimated $300 billion in joint worker and employer pension plans, to do the same.” Cited in the article as influencing the decision is Ten Broeck’s post-master’s thesis at Philadelphia University in which he makes a strong case that index funds offer superior returns at lower cost.