But here’s the key: Of that $1.4 trillion, $1.2 trillion went to passive funds and only $200 billion went to systematic active -- or smart beta -- funds. The clear message is that investors don’t have much interest in active management at any cost.

So you’re right to say that active managers have given active management a bad name. That should worry active managers and motivate them to rehabilitate their reputation.

They should start by acknowledging that there are periods when active styles don’t work, and that the expected outperformance over the long term is modest -- probably 1 percent to 2 percent annually. They should then have a frank conversation with investors about how that expected outperformance should be split between investor and manager.

Smart beta is doing those things, which is why it’s seeing some inflows even as investors abandon traditional active managers.

BR: Ah, so there is some rationality in Investorland! Let’s move to the behavioral concerns, which is my biggest beef with active.

This actually is more about human foibles than it is about active managers, although fund companies certainly know how to market to people’s worst instincts.

The record shows that investors tend to chase fund managers who have had a recent strong run, while jettisoning otherwise decent managers whose preferred style and/or asset class is near the nadir of its cycle. It is one of the most destructive investor behaviors around.

Think about how typical investors learn about any investment manager. It seems to occur after a great run, perhaps with some favorable media coverage as well. But of course, few managers can sustain such outperformance, and yesterday’s star money manager is tomorrow’s mediocrity. Is it any wonder investors typically underperform their own holdings?

By the way, “Active managers have given active management a bad name” is a wonderful sentence. I may have to steal that for a column title.

NK: It’s all yours! And I think it cuts to the core of the debate because there’s nothing wrong with active management per se, even though investors increasingly believe otherwise.