The first item was from Robin Powell, a journalist, producer and financial content marketing consultant who publishes frequently on LinkedIn. The item yet again confirms the Timeless Truth of Investing: It is really hard for an active portfolio manager to outperform their relevant benchmark index. Referencing the annual SPIVA (S&P Global Scorecard) for 2025:

Every year, the SPIVA scorecard lands like a report card no one wants to read. And every year, some active managers find creative ways to argue it doesn't tell the whole story. Capital (Management) may be among the best in the business. But as my colleagues at Index Fund Advisors, Inc. Fund Advisors have demonstrated, when you apply rigorous statistical analysis, not a single fund family has beaten the index with any meaningful degree of consistency. Not one.

From the SPIVA Scorecard:

In our largest and most closely watched comparison, 79% of all active large-cap U.S. equity funds underperformed the S&P 500, worse than the 65% rate observed in 2024 and the fourth-worst year for active large-cap managers over the 25-year history of our SPIVA Scorecards. Headwinds from unrelenting large-cap outperformance subsumed the tailwinds from higher dispersion, resulting in fewer potential opportunities for stock pickers to capitalize on.

The second item was from an article in the Philadelphia Inquirer by veteran reporter Joe DiStefano.  He reports that three investment consultants hired by the Pennsylvania Public School Employees’ Retirement System (PAPSERS) had agreed to pay $30 million to settle legal claims alleging that their bad advice cost Pennsylvania teachers far more.  (Full disclosure: I managed a large cap equity portfolio for PAPSERS at a former firm that ultimately grew to $70 million from 1998 through 2008).

From the article:

The firms had pumped billions of dollars into often poor-performing “alternative” investments such as hedge funds, private equity, urban demolition sites, and an illegal Kurdistan pipeline.

The investment firms are Chicago-based Aon Investments USA, West Conshohocken-based Hamilton Lane Inc., and Portfolio Advisors LLC, now part of FS Investments of Philadelphia. Lawyers for school staff had alleged that they helped the PSERS public school pension fund select hundreds of high-fee but collectively underperforming investments when they could have been making more owning U.S. stock-index funds, according to a complaint initially filed in 2021.

PSERS’ performance was so weak in 2011-20 that the state’s “shared-risk” law, which requires teachers to pay more for their future pensions when investments perform poorly, kicked in for the first time.

The article continues:

The lawsuit also cited public reports critical of PSERS and its advisers, including conclusions of the 2019 state pension study commission (PPMAIRC) report, which found that PSERS and the smaller Pennsylvania State Employees’ Retirement Fund owned far more private “alternative” fund investments, paid some of the highest investment fees to private managers, and posted some of the lowest returns, among state pension funds over the previous decade.

PSERS hired hundreds of specialized U.S. and foreign firms recommended by staff and advisers. Bridgewater Associates, the world’s largest hedge fund manager, collected over $700 million in Pennsylvania pension management fees. By the late 2010s Bridgewater managed one-tenth of PSERS’ outside investments, far more than any other firm, before PSERS began canceling its contracts due to poor returns. Bridgewater’s former chief executive, David McCormick, now serves as one of Pennsylvania’s U.S. senators.

The settlements include:

$15 million, paid by Aon, which served as PSERS’ general investment adviser, collecting $7.2 million in PSERS fees from 2010 until it was fired for poor results in 2023. Aon was hired to recommend how PSERS should invest its assets, which now total $80 billion. But in its “willful blindness,” Aon did “little or nothing to recommend that PSERS reduce the [proportion] of its risky and expensive alternative investments,” according to the complaint. Aon had previously paid PSERS $7 million to compensate for “miscalculation” that exaggerated PSERS’ performance for 2011-20 and $1.5 million to the SEC for failure to investigate “discrepancies” between PSERS’ annual reports and the unaudited data used to calculate long-term results.

$11.25 million to be paid by Portfolio Advisors, which Steinke and his fellow teachers accused of recommending “numerous investments that were inappropriately and unduly expensive.” The payment almost equals the $11.45 million that Portfolio Advisors collected from PSERS to advise on private investment purchases in 2010-17.

$4 million to be paid by Hamilton Lane, a publicly traded advisory firm that replaced Portfolio Advisors as PSERS’ private investment adviser from 2017 to 2023 and collected $10.2 million in PSERS fees over that period. “Hamilton Lane’s failure to keep a close eye on the private market returns” resulted in “excessive” fees — and the firm “took virtually no action” to secure lower fees, even though that’s one of the things it was hired to do, according to the complaint.

The lawsuit essentially boiled down to this: these investment consultants recommended alternative investments that performed poorly and were unduly expensive.

Both items confirm the simple truth that markets are reasonably efficient. Trying to outperform the market is a losing proposition, made even worse by charging unduly expensive asset management fees.

Which ultimately distills down to this Timeless Truth and our maxim:

Prudent, optimized, fiduciary investing reduces to this simple proposition:

Capturing market returns as efficiently as possible. Assembling the right mix of global market exposures— exposures (stocks, bonds, real estate, cash) that can enhance returns, mitigate risk or both—in the right proportions and the appropriate liquidity for your particular return and risk profile, and accessing them through the appropriate accounts/vehicles/products as cost effectively as possible.

Any departure from that simple premise is a step towards greater cost, greater risk and greater outcome uncertainty.

This is how we build portfolios and maximize client outcomes.