The active management insider who changed his mind

Robin Powell Craig Lazzara/ Founder of SPIVA +++ RP: Imagine doing a job for years — and then dedicating the rest of your career to proving it doesn't work. Craig Lazzara was an active fund manager — picking stocks, managing portfolios, trying to beat the market. He then joined S&P Dow Jones Indices, where he became the driving force behind SPIVA — the scorecard that's done more than almost anything else to show that most active managers fail. Now retired, he can speak more candidly than ever about what he saw from the inside. So what made him cross to the other side? CL: I think for anyone who enters the active management business, unless one's results are immediately and consistently as good as the marketing hype would lead one to hope — if you're at all thoughtful, you're going to begin to wonder what actually is going on. I can identify an article that I read that was extremely influential in, in my, uh, development or my thinking about, about these issues. RP: The article was written by an active manager called Hal Arbit, and it was titled The Nature of the Game.. Arbit made a simple but devastating observation. In most professions — law, medicine, accounting, for example — being average is perfectly fine. An average lawyer, say, can still draw up your will. But investment management is different. CL: But what Arbit's insight was, was that in investment management, the average is available for free. You can get the average return simply by buying a comprehensive index fund. And so therefore, an active investment manager — average isn't good enough. You have to be above average, and consistently above average, to be a source of value added for your clients. RP: It's a simple idea, with important implications. If you can get the market return for next to nothing through an index fund, then an active manager has to beat that return, consistently, just to justify their fees. And most of them can't. But that’s not because they're bad people or unintelli

Added 20 Jun 2026