Abstract
The conundrum that we address in this paper is why is active management so strongly supported (and paid) when the evidence suggests that it does nothing for its clients. We first discuss the evidence that provides the supports this statement and then attempt to provide an explanation. In so doing we will consider such topics as whether fund managers are bereft of skills, why lack of skills should not dissuade one from pursuing a career in the industry, the principal-agent problems that plague the industry and many more.

Ron Bird's academic career commenced in 1870 at Macquarie University where he spent three years before moving to the Economics Faculty at the Australian National University where he was head of the Commerce Department for several years. Shortly after leaving the ANU in 1988, the university awarded him the title of Emeritus Professor. Ron then embarked on a career in the private sector; first with Towers Perrin where he was in charge of their asset consulting practice and also of their global research operations. In 1992 he moved to Westpac Investment Management before departing in 1995 to establish a new Sydney-based quantitative funds management firm, in a joint venture with Grantham, Mayo, Van Otterloo (Boston). He returned to academia at the beginning of 1999, joining the finance discipline group at the University of Technology Sydney. He continued his association with GMO (Boston) for the next five years, acting as their academic adviser and coordinating their global research activities. More recently he has conducted several projects for organizations in the financial services sector and played a key role in the establishment of two new funds management firms. For the last 10 years at UTS he has been the Director of the Paul Woolley Centre which has recently transitioned to the Investment Management Research (IMR) Program. In 2011, he also took up a Chair in Finance in the Waikato Management School (Hamilton, New Zealand). Ron’s main research interests are in the economics of the funds management and superannuation industries and also various topics in the area of corporate social responsibility.