Hi Jason and Tom,
This is an excellent article. I'll quibble with some pieces of your argument, but your fundamental point--that investors have missed the BIG RISK of forgoing enormous upside in order to avoid the little risk of volatility--is an extremely important one. Investors hurt themselves by choosing low-volatility investments, and investment managers hurt investors by encouraging such behavior. I believe it's that misdirection--encouraging investors to focus on short-term volatility, rather than helping them to realize upside outcomes--that explains the growth of the two most unfortunate forms of investment management, hedge funds and private equity (including private equity investments in my asset class, real estate), which together have deprived investors of literally trillions and trillions of dollars by sucking them into paying high fees AND forgoing upside outcomes in return for enabling them to use data that disguise their risks.
My main question regarding this article is: what does it have to do with an "active equity renaissance"? Chuck T offers a perfectly sensible response: "keep it simple with 1/N asset allocation"--and, I would add, minimize the loss to your portfolio in the process by choosing the lowest-cost passively managed instruments available in the process. What's wrong with that approach?