CHICAGO -- Advisors have a tough job. Tough enough that Eugene Fama, the so-called father of efficient markets, wouldn't want it.

It's hard -- really hard -- to pick investments that outperform over time, Fama, the 2013 Nobel prize winner in economics, a professor at University of Chicago and a director and consultant for Dimensional Fund Advisors, argued during a session at HighTower's first annual conference here on Thursday.

"I have one word for you and you're not going to like it," he said. "Chance."

According to Fama -- and his well-known work on efficient markets which suggests that prices reflect all available information -- after costs, active investing is a zero sum game. "This is arithmetic, not a hypothesis," he said. "The point is, you can't just go out and look at funds and pick out winners because they had good past returns."

As Fama described it, the outcomes for active vs. passive investing can be compared to flipping one coin 10 times instead of 3,000 coins 10 times.

"Basically the job is to present to clients the uncertainty of tilting to different risk factors," Fama said. Advisors have to explain to clients the risks inherent in investing and ultimately that much of the outcome (save for tax-efficiency, for example) is left to chance or luck.

In the end, advisors may have to tell clients, "If you can't live with that, you shouldn't play the game," he said.

So what should advisors and their clients do? "You decide how much you want to tilt to these [types of risks and] returns and then you diversify the hell out of it," Fama said. "Choose your asset allocation and then make sure you get fully diversified portfolios that get you there."

Of course, in reality, active investing is widely used, including among advisors in attendance. According to Fama, in mutual funds, 70% of assets are invested actively, while 30% are invested passively.

One advisor asked if now was really a time to be passive considering how high the market has gone. Fama responded that looking forward at every point in time, after costs, active investing is still a zero sum game.

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