From time to time, there are some decent questions raised about investing that emanate from the academic world of investment research. You should always dig into the primary paper, but essentially these folks are suggesting that sector neutrality as practiced in the long-only world actually hurts performance.

So why do “we” do it? The answer is obvious per Munger Theory – show me the incentive and I will show you the outcome. People en masse don’t like to risk their livelihood by committing to being right with conviction. So the industry pursues sector neutrality to avoid being badly wrong.

And we wonder why indexing has taken off.