First came “active” management: A pension fund, endowment or foundation hired managers that it felt could get results that “outperformed” the market.
That, though, had its comeuppance in 2007 and 2008. “A lot of asset managers got disillusioned with active management,’’ after their investments went south in the wake of the credit crisis and the active seekers of alpha “didn’t provide protection” from the downdraft. Then came “passive” management: The idea that your investing organization was spinning its wheels and overpaying for the privilege of trying (and failing) to get an above-market return. That the best tack was to just follow the market or a piece of it and cut the costs of executing that “passive” approach.