Charley Ellis, the man who unmasked the loser’s game

Posted by Robin Powell on January 15, 2019

Thanks to everyone for the positive feedback on the first in our #InvestingSuperheroes video series, featuring Jack Bogle.

Now for the second video, which acknowledges the huge contribution that Charley Ellis has made to the investing industry.

Charley was the man who famously called active money management a loser’s game in an article in the Financial Analysts Journal in 1975.

In it he wrote: “The investment management business is built upon a simple and basic belief: Professional money managers can beat the market. That premise appears to be false.”

Of course, we now know that Charley was right, but at the time, the idea that the active management subtracted value from the investment process was more than a little controversial.

Anyone who has met Charley will tell you that, as well as being enormously intelligent, he’s also a perfect gentleman. He has nothing whatsoever against active managers. Indeed his central thesis is that the best managers are now so good at what they do, and have such good technology at their fingertips, that it’s extremely difficult for any one of them to outwit their peers.

Another problem, he says, is the sheer size of the fund industry today. When Charley went into it in 1963, he was one of only two people in his class at Harvard Business School to do so. Since then, of course, the industry has mushroomed. Charley’s view is that it needs to shrink drastically and that there will only be a case for investors using actively managed funds again when somewhere between 80 and 90% of people invest in index funds.

It must have been hard, over the years, for him to take the line he did, especially given the way the industry has dominated the debate around active and passive investing. Yet Charley has remained a quiet voice of reason, and even now, at the age of 81, he still travels the world, helping people to understand how investing really works.

I won’t be taking the “superhero” moniker lightly in this series. Charley Ellis is someone for whom it’s entirely appropriate.

Enjoy the video, and please do share it.



If you missed the first video in the series, here it is:

Robin Powell

Robin is a journalist and campaigner for positive change in global investing. He runs Regis Media, a niche provider of content marketing for financial advice firms with an evidence-based investment philosophy. He also works as a consultant to other disruptive firms in the investing sector.


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