In his famous 1989 essay “The End of History?” (and subsequent book), author Francis Fukuyama argued that the the age-old battle between liberal democracy and other (more totalitarian) forms of government was quickly coming to an end.  Since such battles had been the hallmark of human history, history itself was therefore coming to an “end”.

To a great extent the history of investment management (at least, since Markowitz) can be described as similarly bipolar struggle - this one between active and passive management.  Efficient market theorists would argue that the final pitched battles between the two sides are being fought in the mutual fund and ETF industries – with ETF’s destined to triumph.  However, proponents of active management point to the hedge fund industry as proof that active management is not only alive and well, but is consolidating its forces.  Are either of these the final epic battles in the history of asset management?

A couple of news items yesterday suggest the balance of power is tilting toward the efficient market theorists.  First, Mark Hulbert writes about Kenneth French’s latest paper, “The Cost of Active Management” in the New York Times.  As far as we can see, the paper has not yet been released to the public.  So Hulbert’s interpretation is all we have to go on for now.

More…