Hello Ahmed,

Thank you for taking the time to share your thoughts. I disagree with you that managers themselves are solely at fault. The industry has changed over the past 50 years and many participants have shaped those changes. Yes, the active management community has played its part. See my Enterprising Investor series entitled, Alpha Wounds, for some of my criticism for the active management community. Other participants include asset owners and consultants, too.

Regardless of where the fault lies, the point is that our end clients are not getting ideal results. To the degree that these issues are not issues of talent, but are issues of incorrect structures, we should strive to fix them. Tom's research, along with that of others, suggests that research analysts and portfolio managers are actually good at security selection, but that portfolio-level decisions serve as a drag on returns. These constraints have been put in place in a tug of war between the asset managers, consultants, and asset owners.

Last, is there any evidence that consultants who want very constrained strategies so that they can properly execute their asset allocation strategies are adding alpha for the client, and that clients over time are achieving their goals? I think there is poor to no evidence that this additional layer adds value for end clients. This is an area of research that needs to be undertaken, in my opinion.

Yours, in service,

Jason