U.S. equities outperformed their international counterparts by 8 percentage points per year on average over the 10 years ended December 31, 2019. However, our proprietary Vanguard Capital Markets Model (VCMM) suggests that this outperformance is unlikely to persist over the next 10 years.
The continued development of strategies to harvest factor returns in a low-cost manner has effectively raised the bar for many fundamental active managers who need to generate outperformance to justify their higher fees.
Since the first index fund was launched some 45 years ago, millions of investors across the world have taken advantage of this easy-to-implement investment vehicle that offers transparency, diversification, low-costs and tax efficiency.
In this paper, we introduce our concept of the Idea Multiplier, a metric to measure the spread of new ideas. Because the Idea Multiplier has recently accelerated, we expect productivity growth to rise in the near future.