To be fair, the debate has at least evolved, starting with the Efficient Market Hypothesis in the 1960s, continuing amid the rise of equity indexing and the behavioural finance counterattack of the 1980s and 1990s, and eventually moving on to current arguments about the use of exchange-traded funds, hedge funds and liquid alternatives. Yet one aspect has remained unchanged: the discussion still centres on which approach is better.

As a multi-asset investor, I believe this debate has been fundamentally misconceived. The choice between approaches should not be binary. Rather, we need a framework for thinking about both active and market sources of return within an investment portfolio. How much exposure to have to each source should depend on the investment problem that needs to be solved. 

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