Which is ironic because, as you point out, investors deserve some of the blame for the poor results they’ve gotten from active management. I recently compared fund returns with investor returns for a variety of active and passive funds. I found that investors in passive U.S. stock funds captured on average 96 percent of their funds’ returns over the past 10 years through July, whereas investors in active funds captured just 71 percent. I found the same disparity among foreign stock funds. That’s further evidence that investors tend to chase hot active managers to their detriment.

But here, too, I think smart beta can help. For one, smart beta allows investors to make long-term bets on active styles rather than active managers, the same way that a growing number of investors are betting on passive, capitalization-weighted indexes. Also, smart beta allows investors to compare active managers with active bots, which should help them sidestep managers who are merely peddling high-cost active styles without adding much value.

All of that should give investors more conviction in their choice of active funds and bolster their ability to hang on.

BR: Now we are at the most important part of this debate! I would rewrite your comment as: Investors deserve most of the blame for poor results, due to not having a plan they can or want to stick with, chasing the hot hand, being emotional in their investments, and lastly, their lack of discipline in following their own plans.

Active management has waved shiny objects at investors and they historically came running. Some investors have figured out that they shouldn’t behave like magpies -- that's why there's all this flow into passive indexing since the great financial crisis. It’s noteworthy that the vast majority of assets are still not managed passively.

My bottom line is most people are better off with low-cost indexing for most of their money. Yes, active does have a role in asset allocation and portfolio construction, but only when it is 1) low cost; 2) additive to portfolio diversification; and 3) not used by investors to encourage their worst instincts and behaviors.

NK: We should acknowledge, however, the information asymmetry between investors and money managers. Many investors, including some institutional ones, need help putting those “shiny objects” in perspective.

But active managers -- and the brokerage supermarkets that peddle their funds -- have not been helpful. They typically wave around little more than the dazzling returns and five-star ratings of their best-performing funds. There’s little warning that performance tends to be cyclical, or that a fund’s active style happened to be in favor, or how fees are likely to impact the chances of future success.

So it’s not surprising that investors have fared poorly and that a growing number are giving up on active management. While it’s true that more money is still managed actively than passively, passive is quickly gaining ground.

Still, I don’t think active management is going away. It makes sense to diversify across active styles, and the smart-beta bots have shown that active management can be delivered cheaply and transparently.