Hi Russell,

Thank you for taking the time to share your thoughts with the audience. I am not advocating for high market capitalization. I am advocating that active investors examine why their benchmark consistently beats them. Passive benchmarks have people determining criteria for inclusion. Doesn't it make sense that we try and identify what these winning criteria might be? Thought so. In the case of the S&P 500 market capitalization is one such factor. I am saying that market cap is a byproduct of characteristics about, and performance of, the underlying business. See the list above for those very factors I highlighted. Active managers can assess these characteristics. Was this not clear?

Also, all criteria/definitions have exceptions...in fact, Kurt Goedel mathematically proved that this would always be the case. More directly, when you ringfence any idea, you are agreeing to exclude factors from your definition. This is the paradoxical nature of definitions. So to highlight exceptions to the rule, such as Enron, is a pretty easy endeavor as all definitions have violations to the rule. Do you have anything more robust to add?

Also, I agree that momentum is a failure. In fact later in the piece above I argue that momentum effects must be backed out in order to make an apples to apples comparison between active and passive strategies. I say that passive strategies are given a free-pass for the momentum generated. Apologies if this wasn't better communicated and would appreciate you showing the audience where I advocated for momentum investing.

Last, regarding ESG factors. Yes, a nice add, and could probably be the basis of another Alpha Wounds piece. Are you aware of any updated - that is, post 2013 - pieces that show ESG's performance as a strategy or analysis technique versus non-ESG? The last comprehensive research I saw found ESG returns were not significantly different from a passive index. Wouldn't it be nice if ESG was more than just a hygiene factor?

Yours, in service,

Jason