Why I Consulted with an Active Fund Manager

Photo by Kenny Eliason on Unsplash

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“Have you sold out?” That was the half-joking response of a friend when I told him I was consulting with L2 Asset Management, an active fund manager.

I have been (and remain) a passionate advocate for index-based investing for over two decades. I wrote The Smartest Investment Book You’ll Ever Read in 2006. In that book (and in five subsequent ones and hundreds of articles), I distilled sound investing to three index funds from low-cost providers like Vanguard.

For many investors, market-cap weighted index funds deliver inexpensive beta and are a valuable resource.

Why then would I work to increase the profile of an active fund manager? My reasons reflect the increasing pressure on advisors to differentiate themselves and demonstrate value. They also illustrate the blurred line between “active” and “passive” fund managers.

What is active?