This article originally appeared here in Institutional Investor on April 12, 2019.

In his seminal 1975 research paper “The Loser’s Game,” Charley Ellis likens investing to tennis. Ellis is the founder of Greenwich Associates, a prolific author, a long-time member of Yale’s investment committee, and a staunch proponent of indexing.

Tennis, as he describes, is two different games. Amateurs play a loser’s game, in which unforced errors far exceed winning shots, and the outcome of the game is determined by the actions of the loser. Professional tennis players, in contrast, play a winner’s game with beautifully placed strokes and a victor determined by which player more frequently hits the ball out of reach of the opponent. With essentially the same court, racquet, and ball, Roger Federer plays a completely different game from the rest of us.

Investing in public markets has become a loser’s game, and probably has been for a long time. High fees, excessive trading, and a level playing field of rapidly accessible, ubiquitous information make it increasingly difficult for anyone to beat the market. Individuals are at a distinct disadvantage to professionals, and even professionals have struggled to justify their value net of fees. The data supporting investing in low-cost indexes is compelling, and the movement of funds from active to passive strategies exemplifies this conclusion.

So if the evidence is obvious and compelling, why do so many investors continue to pay high fees for active management?

The answer lies in the definition of active management. Beating the S&P 500 by picking among large cap U.S. stocks is a difficult game to win. But investors willing and able to expand the efficient frontier beyond public equities and bonds find an abundance of attractive assets and opportunities that index funds cannot access. The payoff for venturing outside of traditional assets to alternatives has been worth the higher cost, so long as the measurement period goes beyond the recent soaring bull markets or accounts for total portfolio risk, or both.

Yale University’s latest endowment update shows an extreme version of the different game David Swensen plays. Less than a quarter of Yale’s portfolio (23 percent) is invested in public equity and fixed income. Of that, Yale allocates more than one-third (8.5 percent of the total portfolio) to emerging-market equities — an asset class that even Charley Ellis contended should not be indexed on a recent podcast episode of Capital Allocators.

More than 85 percent of Yale’s assets are invested in alternatives that can’t or shouldn’t be replaced by index funds. The active-versus-passive debate is irrelevant when so much of your investment activity occurs in a completely different investable universe.

It is easy to argue that Yale is Yale, and very few pools of capital can compete with Yale’s resources and experience. The more you hear about the experience of institutional investors, however, the more you learn about broad success outside of public markets.

The State of Oregon, for example, has been a long-time participant in private equity. At times, the investment team gets criticized for paying high fees, to which CIO John Skjervem offered a “snarky remark” at a recent board meeting. “We spend millions of dollars on fees and we spend millions of dollars in carried interest… and in exchange, we’ve gotten billions. Spending millions to get billions seems like a pretty good deal.”

Yale and others’ annual snapshots offer rare glimpses into the thinking of leading institutional allocators. Long-term oriented investors have little need to participate in discussions of the daily horse race of fund flows out of public active strategies and into passive index funds. Frankly, they are too busy hunting for excess returns in harder-to-access corners of the world to discuss why their apples are shinier than the index funds’ oranges.

As the tennis season heats up with its Grand Slam this summer, we can enjoy watching the seemingly effortless game of Federer, the punishing ground strokes of Nadal, and the all-around genius of Djokovic.

But we shouldn’t think for a second that we are playing the same game as them when we step on the court.