Hello John,

Actually, this is an oft repeated fiction. Tom addressed this very well in my interview with him last year. Here is the link: https://blogs.stage.cfainstitute.org/investor/2016/07/26/is-active-mana…

I reproduce my question and his answer below for convenience:

"CFA Institute: Talk to me about the additional fiction that active management is a zero-sum game.

"A strongly held belief within the investment industry is that stock picking across active equity funds must be a zero-sum game. Such an assertion is true for the stock market as a whole, as stock picking must have as many losers as winners. But this does not have to be the case in every market segment.

"The US stock market has a current total market value exceeding $38 trillion. Active US equity mutual funds hold $3.6 trillion, about 9% of all equities. So it is entirely possible for the average stock held by funds to outperform at the expense of the other 91% of the equity universe.

"Arguing that stock picking among equity funds must be a zero-sum game is akin to arguing it is impossible to drown in a lake of average depth of three feet. That lake may have pockets 20 feet or more deep. Both represent indefensible statements.

"In particular, this study estimates that the average stock held by active equity mutual funds earns an alpha of 1.3%, confirming that mutual funds do earn superior returns. Indeed, this must be the case in order for equity funds to cover their fees and, in turn, earn a near-zero collective alpha."

Yours, in service,

Jason