Capital Ideas Blog

The world's largest mutual fund benchmarks with CRSP

By Robin Mordfin

From: Blog

While many outside academia claim that universities are simply ivory towers filled with navel gazers and useless information, the Center for Research in Security Prices at Chicago Booth once again proves how the work of outstanding university research translates to real world triumphs. Vanguard’s Total Stock Market Index Fund, which began using CRSP’s US Total Market Index for benchmarking last October, announced last week that it edged out PIMCO’s Total Return Fund to become the world’s largest mutual fund.

Vanguard ended the month with $251 billion in assets compared with PIMCO’s $247.9 billion. Bloomberg directly credited CRSP’s Index with boosting the Vanguard fund to the number one position, pointing to the Index’s 27 percent return.

Clearly, October was a really, really good month for CRSP, whose chairman, Eugene Fama won the Nobel Prize in Economics alongside fellow CRSP economist Lars Peter Hansen. Along with the Vanguard feat, these prizes make it even more obvious that the center is tops in market data.

CRSP was created to provide data for scholarly research and to help out ordinary investors by providing investment funds with the kind of information that make sound decisions easy. Its founders started off by creating a database of monthly prices for commons stock that enabled researchers to conduct the first comprehensive study of rates of return. Since then, CRSP has expanded its research tools to be even more useful, and now includes among others, historical, real estate, cap based portfolio and US Treasury indexes.

Vanguard’s market-winning tool, CRSP’s US Total Market Index, is part of a crop of 10 new sector indexes the Center introduced in 2011 that focus on developing value and growth style indexes. The Index represents mega, large, small and micro capitalizations that represent nearly 100 percent of the market.

“The CRSP indexes don’t deviate too much from common practice, because we are trying to make something that is practical,” explained Chicago Booth's John C. Heaton in a previous interview with Capital Ideas. Heaton created the new products along with Professor Lubos Pastor. “And they’re investable.” Vanguard’s new market position proves that.

In addition to Heaton and Pastor, CRSP’s board of directors is entirely populated by Booth faculty, including Steven Neil Kaplan, Tobias Moskowitz, John H. Cochrane and Douglas W. Diamond. Today, CRSP data is used by nearly 450 universities in 35 countries.  
“We have CRSP, it is the first, the biggest, the most well-known, the most respected.” Heaton added. “It’s the gold standard.”


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