Hi Chris,

Thank you for your comments and for adding to the conversation.

If you look at the major papers from the academic community they are most certainly not looking at absolute returns. They are usually looking at measures that they believe incorporate definitions of variability. If you read Markowitz's original work from the 50s he makes a case for standard deviation/variance as risk proxy. This was a conscious decision. In any case, regardless of the motivations, volatility is not risk. Borrowing your logic - "Surely academics were always perfectly aware of the long list of risks faced by an investor." - surely the academics and practitioners that have also raised the concern that volatility is not the same thing as risk must know what they are talking about, too. If not, if it is just some academics understand this, then my point still finds an audience.

Active managers contribute no alpha after fees...what time period are you considering? Which active managers, those in the US, those in Europe, those in Africa, those where? Your blanket statement requires some source, don't you think? As I pointed out in the piece above, most of these narratives trace back to a paper that looked at returns through 2006. We are now 8.5 years past that moment. Research prior was not so indicting. Also, a key assumption of a claim, "active managers contribute no alpha after fees" is that active management is being done right, and well. In my opinion, it is not, and this will be the focus of additional articles in this series. For this, the active management community has to come to account. Last point on this issue...passive investing is the greatest, self-reinforcing momentum strategy ever devised. To me, any apples to apples comparison has to factor in the momentum factor of "Hey, everyone, buy this list of assets because it is on someone's list to track these things!" I am not entirely sure how to separate out the momentum factors, but this research has to be done in order to make truly fair comparisons, why? In the era in which a massive population bubble has saved for retirement (Baby Boomers the world over) and many have been swayed to invest in index funds and to dollar cost average and to contribute to their 401(k)s there is wind in the index fund sails. Yet, we are about to go through an extended period of demography where the two generations following Boomers are much smaller. Will the wind still be in the sail? If there is not wind in the sails, you are likely to have long periods of sideways to down markets. In a declining market you will not want to be invested in the index.

Next, I am not familiar with your issue with 'cash' - please feel free to share with the group.

The active versus passive is a discussion that all people in the investment industry should be engaged in having. Professional money managers are a part of that community and their voices should be heard. As should the voices of other communities. But if these voices are to have power then they must also be accountable. Poor measures of success are especially vulnerable to criticism.

Yours, in service,

Jason