Modern market narratives revolve around geopolitics, central banks, inflation, QT/QE, and fiscal policy, while company fundamentals attract far less attention. This shift stems from the rise of passive investing, benchmark-driven mandates, regulatory pressure, and the dominance of central banks since 2008. yet long-term equity performance is still driven by the economics of individual firms. This disconnect creates both risks and opportunities – particularly for systematic, fundamentals-based frameworks like Neox IQ.
The Rise of Passive Investing and the Power of the Index
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Benchmark Pressure and the Growth of Closet Indexing
Second, even among “active” managers, the dominant incentive is to stay close to the benchmark. Consultants, regulators, and investment committees evaluate performance relative to indices, and large deviations – high active share – introduce career and business risk. As a result, many active funds have quietly become “closet indexers,” keeping tracking error low and framing their communication in macro terms rather than detailed stock level views. Macro language is safer, more scalable, and easier to defend.
NDL Performance
5 November 2026
Regulation: The Hidden Engine Behind Indexification
A third, often overlooked driver is regulation. Over the past decade, rules such as MiFID II, PRIIPs, SFDR, IDR, and Dodd-Frank have dramatically increased the compliance burden for financial institutions. Suitability frameworks, product governance, and reporting requirements penalize complexity and emphasize documentation. In this environment, standardized model portfolios and low-cost index ETFs have become the lowest risk choices. High active share strategies, stock specific explanations, and unconventional positioning create additional documentation and potential liability. Macro narratives, by contrast, are easy to justify across clients and regulators. Regulation has therefore unintentionally accelerated the shift toward indexification and macro centric thinking.
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