Hello Steve,

The active vs. passive debate is a perennial one and only in the last 15 years has it become heated. Current research makes the argument that active managers of yesteryear, when evaluated with current thought about what properly constitutes quality management, do not outperform benchmarks. I would consider this spurious research. Why? Because the active managers of yesteryear had no opportunity to try and satisfy the criteria.

Though I believe sports analogies are overused, I am going to rely on one here. Sports records of bygone eras ought not to be usurped by current era players. Why? Rules change. For example, in baseball the height of the pitchers mound is different than it was in the past. So this effects all pitching and hitting records. Another important factor - I believe also germane to the active vs. passive debate - is that in sports the pay is so much higher now than it was, say, 100 years ago. This has created a class of individuals interested in maximum performance, and leagues interested in the best players from around the world. Does this change in incentives affect records of the past? No, it shouldn't in my opinion.

For apples to be compared to apples the criteria for success in place in the past needs to be respected. Research that uses current preferred methodologies is interesting, but I think that is about all it is.

Last, I am only about 40% of the way through an extended discussion about this topic, which I am referring to as "Alpha Wounds." I believe our entire industry is culpable for the current state of affairs in the active vs. passive debate and I am trying to spark a conversation. Thanks for participating in it.

Yours, in service,

Jason