[laminarflow]

For those interested in this topic, Horizon Kinetics' 2016 presentation "Indexation: Capitalist Tool" is a fascinating read, as it points out some baffling structural mismatches between indexes and their underlying securities beyond just liquidity (which was the main focus of Burry's analysis).

http://www.grantspub.com/files/presentations/Grant's%20Confe...

Edit Some highlights:

> Does an asset allocation program or roboadvisor tool seeking foreign market exposure know that 6 of the top 10 holdings of the iShares MSCI Spain Index get 70% or more of their revenues from outside of Spain? That a purchase of the ETF is, essentially, investing outside Spain? The same holds true for emerging markets ETFs.

> the business demand of ETF organizers for liquid stocks has only increased, with the influx of funds directed into the same limited population of liquid stocks. ExxonMobil is one of the most liquid. Ergo, it will be found almost anywhere one can imagine that it can be placed. It’s Growth, It’s Value, Its’ a Bird, It’s a Plane...

> Would an active manager of a low-risk strategy be permitted the risk of a near-50% weighting in financials? ... These largest-in-class ETFs can legitimately be characterized as low volatility, since of late the financial sector has not been volatile. And the high weighting enables the ETF to attain its advertised low Beta.