The Race Among Active Managers To Come In Third

For what seems to be twenty years now, we’ve heard this steady mantra that active equity management, especially in the domestic large cap space, has not added value when compared to passive alternatives. I understand the frustration. As one who has spent the better part of the last thirty years attempting to build a case for active management (and earning ample gray hair in the process), the fact is, it’s true. Most managers have not earned their keep once you factor in expenses and other opportunity costs. You hear of companies not earning their cost of capital. The same is true of many managers. Most don’t earn their relative cost of capital either.