For more than a decade Michael Green has been telling everyone who would listen about the dangers of investing in passive vehicles like index funds rather than in individual stocks. He has argued that the growing dominance of passive investing distorts capital formation, creates market instability, and carries the potential for a crash.
“It turns out nobody believed me,” Green confessed to Institutional Investor, which labeled him the Cassandra of passive investing in a profile in 2025.
“The simple reality is that Cassandra was telling the truth,” he said. But “nobody would change their behavior.”
Green has realized he’s unable to stop the flood of money into passive vehicles. So, he decided to try and prove his thesis and profit off the distortions by launching a new company, Tier1 Alpha Asset Management, that he thinks can beat passive at its own game. Instead of focusing on the S&P 500, Tier 1 plans to use its research on flows into individual stocks — whether from 401(k) investments, pension funds, sovereign wealth funds, or others — to outperform the overall stock market.
“If I can identify which stocks are most likely to respond aggressively to the next dollar of flow, then I can somewhat predict the behavior of the S&P 500 by aggregating up all the individual components,” he explained. Instead of building a product weighted by market capitalization, he is building one that is weighted by flows into individual stocks.
Green will serve as CEO and CIO of Tier 1. He says the firm will offer ETFs and separate accounts that should have a 1 percent tracking error to the S&P 500 and offer better returns as well.
“More than anything else,” he said, his new project will give people the “opportunity to try something different.” And if he’s right, he said, “you have to discard everything you know about investing, and stop asking about the fundamentals.” Instead, he said, an investor must ask how the next dollar of passive inflows is going to impact a stock.
Green used the example of highflyer Nvidia as an example. Not only are flows into S&P 500 index futures and ETFs flowing into the stock, but money from privately held portfolios, futures, and even random ETFs that have decided to put Nvidia in their portfolio also finds its way in. Figuring out all those flows can help determine when or whether the stock goes up or down.
The firm will also license an index, which Green expects to launch within the month, allowing other people to test his theory.
Tier 1 will also offer an ETF and separately managed accounts that he said will offer “free additional return to the S&P 500.” Green said the managed account product will be sold largely to institutional clients.
Green acknowledged that, “some people choose to refuse to believe me for a wide variety of reasons,” which is likely to slow the rollout. “That creates opportunity for us to slowly convince people, that we do know what the heck we're talking about and convert them into customers, ultimately building a business around it.”
Green, a former macro hedge fund manager, has been the chief strategist at Simplify, an ETF provider, for the past five years. He declined to disclose how much money he has raised for the new venture, which he says he began working on nine months ago.
