Many reject active management because it's hard to pick good managers who will provide alpha going forward. While I don't dispute this, the long-term benefits make it worthwhile.
To find good active managers, I recommend a few prudent steps.
Seek managers with long-term records of sticking to their investment philosophy, and favor those who invest meaningfully alongside their clients.
Evaluate managers over the long term, by which I mean 20 to 30 years or more: and don't change course because of short-term underperformance.
Know that career fears can cause you to abandon otherwise sensible investment plans; therefore, build processes and systems to prevent emotional decisions. Institutions can be subject to the same emotions and behavioral biases as retail investors.
I opened my firm in 1974 influenced by the heady days of the "Nifty Fifty" and the major correction of the early '70s. I also had the great fortune to be mentored by Benjamin Graham, then in the twilight of his illustrious career. In my opinion, his greatest professional contribution to investing was the "margin of safety." Since you cannot know everything about a stock or how markets will behave, you should always seek a margin of safety — a price discount from a stock's estimated true value. This concept captures exactly what is missing when capital is passively directed.
Over the long term, professional active managers have helped create significant wealth by diverging from benchmarks. However, being different can occasionally cause investor anxiety and has perhaps inadvertently supported the ascent of passive management.
My advice, therefore, is this: Be diversified. Don't abandon professional active management. I believe, if or when a passive investment bubble bursts, investors will be glad they had an active manager to help them navigate the aftermath.