finance
Howard Marks Links Passive Investing Growth to Active Managers' Underperformance in Interview
Oaktree Capital co-founder Howard Marks discussed the dominance of passive investing in an interview, blaming poor performance by active stock pickers rather than low fees. He recalled lessons from the late 1960s and noted opportunities for active strategies in market downturns. U.S. stock indices showed mixed year-to-date gains as of May 5, 2026, with premarket advances on Tuesday.
May 5, 7:42 AM·1m read1 source
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Oaktree Capital co-founder Howard Marks attributed the rise of passive investing to the underperformance of active stock pickers in a recent interview. He stated that indexation has taken over not because it is inherently superior, but because active management has been so poor.
"My answer is that indexation has taken over as it has, not because it’s so good, but because active management was so bad," Marks said.
The interview, conducted with Nikhil Kamath, focused on the shift toward passive vehicles like the SPDR S&P 500 ETF Trust (SPY) and Invesco QQQ Trust ETF (QQQ). Benzinga reported Marks' comments as part of a broader discussion on the trillion-dollar growth in index funds. Marks emphasized that fees play only a secondary role in the comparison between active and passive strategies.
Marks recalled his time in graduate school in the late 1960s, when professors taught that most mutual funds underperformed benchmark indices while charging exorbitant fees. He argued that even if active managers matched the low fees of index funds, their inferior decisions would still make passive options preferable.
"Even if they charged the same fee as the index fund, if the passive decisions are inferior—indexation is still better than active," Marks stated.
Market conditions influence the appeal of active versus passive approaches, Marks noted. He said bad times create openings for active management by driving down stock prices and offering chances for superior insight. 99% year-to-date, according to Benzinga.
