Consultant Spotlight: The Median Manager Is Terrible--Here Is Why

So another year begins, and with it no doubt another round of the same conversation that is held every year--should I use active or passive management approaches to build my portfolio, and if so in which asset classes?

Ian Toner

By Ian Toner, director of strategic research, Wurts & Associates

So another year begins, and with it no doubt another round of the same conversation that is held every year-should I use active or passive management approaches to build my portfolio, and if so in which asset classes? We all know how this conversation works. Both sides of the active/passive debate have their partisans, and both sets of partisans have their preferred data and approaches for analyzing the issue. Proponents of active management suggest that active manager selection is, in the right hands, an informed process rather than a random one, where a knowledgeable investor can use tools and insight to identify managers who are able to outperform over the long term. Proponents of passive management focus on the importance of costs, and the propensity of investors and their advisors to make bad decisions.

At the heart of the discussion...