and the Cassandra Portfolio
The following is in response to Dave Loeper’s article, The $2 Million Charity Challenge to Active Investors, which appeared on February 23, and to Bill Sawyer’s response on March 9:
David,
Let’s be clear. My practice is not solely based on the premise behind your challenge of active only versus passive management. Indeed, I advocate for active management as a component in most investors’ portfolios, just like Harvard and Stanford and a myriad of other institutions that manage serious money…trying to build more efficient portfolios.
My March 9 proposal for your bet with Roger Schreiner was to better reflect at least a few representative investor realities. Why have just one scenario? That’s like having Tiger and Phil compete in a par-three-only one-hole golf match.
Many advisors are trying to evaluate the pros and cons of active versus passive management. Both styles are fretfully employed in our industry.
Passive indexing generally provides market returns and is based on an elegant theory (much of which I personally acknowledge and respect), but its practice has clearly revealed some serious flaws this decade. And we all know, and many point to, the fact that MPT was awarded the Nobel Prize. But then again, Dr. Egas Moniz was awarded a Nobel – in physiology – for a procedure known as the lobotomy. It, too, was considered a good theory at the time.
Good active managers exist and do add value (particularly, I must add, if utilized in a multi-manager format, so as to reduce specific manager risk…but that is for another discussion) .
Both passive and active money management styles have a place in our world. I think Harvard and Stanford agree.
Let your challenge begin.
Sincerely,
Bill Sawyer
Conservative Asset Management, Inc.
Louisville, KY
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