Matt Levine, Columnist

Should Mutual Funds Be Illegal?

Probably not, no.

April 16, 2015 at 10:31 PM UTC

Matt Levine is a Bloomberg Opinion columnist. A former investment banker at Goldman Sachs, he was a mergers and acquisitions lawyer at Wachtell, Lipton, Rosen & Katz; a clerk for the U.S. Court of Appeals for the 3rd Circuit; and an editor of Dealbreaker.

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I wrote yesterday about what I think is a congealing regulatory view that index funds are Good and should be encouraged, and that active management is Bad and should be discouraged, but here is a wonderful mad corrective from Eric Posner and E. Glen Weyl at Slate, calling on Congress to ban index funds:

So it's not just index funds; diversified actively managed funds would also face restrictions, though "By owning shares in different industries, mutual funds could continue to offer the diversification benefits that investors value them for." Index funds, though, which by definition own all the companies in all the industries,1429217061102 would be off limits in this regime, at least in retirement accounts.1429220596804