A Closet Index Carol

Does alleged index hugger American Century Value really belong on the naughty list?

December 28, 2021

Last month, a law firm filed a class action lawsuit alleging that the $2.4B AUM American Century Value Fund (TWVLX) is a “closet indexer” (or was, from October 2018 to September 2021).

We hate to play “Scrooge” this soon after Christmas, but we’re just not seeing it. (And neither are some other folks at Barron’s). In fact, we were tempted to bring back our Chart of the Week format just to highlight how much basic charts raise questions about the claim.

But Christmas is a time of giving, and as long-time proponents of robust, thorough analysis, we see no reason to stop with one chart when we can give you a couple more.

He’s Making a List…

The basics of closet indexing are simple: a fund claims to be actively managed, which merits charging higher fees. But behind the scenes, they try to closely mirror the benchmark, reducing their management costs and overhead.

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