Where does happiness really lie?

This article compares the theory of equity funds – which advocates their widespread adoption – with the actual behaviour of households. US households have significantly increased their holdings of equity funds over the past thirty years, without, however, reducing their direct investments in firms, which suggests the existence of a demand for investor engagement and voice. Fund managers regularly introduce innovations to support this quest for meaning, but these do not yet appear to have met households’ needs, particularly in Europe. It is, therefore, ultimately public policy promoting quasi-compulsory saving that appears best placed to facilitate the widespread adoption of index funds, whilst not, however, allowing savers to engage meaningfully in the life of firms.