Vanguard's chief investment officer, Tim Buckley, on why active investing is a losing game

Mortimer J. "Tim" Buckley, Vanguard's chief investment officer, who is leading the latest wave of passive investing that got started under Vanguard's founder and former CEO Jack Bogle, joined CNBC PRO for an educational interview on money management and the evolution of investing.

"In the '80s, only about 30 percent of assets were professionally managed, so professionals could go out against amateurs and basically steal alpha. Today you are over 70 percent, getting on 80 percent professionally managed. Now you have pro against pro," Buckley said.

Given the rise of technology over the past three decades, which has facilitated the flow of information, the CIO says active investing is a losing game for most active managers.

"Now I have to be better than someone else who's got their CFA, their Bloomberg terminal and all the flow of information; they're watching CNBC; they've got all of this information flowing in. ... It's a much tougher game to find alpha," Buckley said.

The statistics back up this claim, with a recent report from the Financial Times showing that nearly all professional actively managed U.S. equity funds sold in Europe, for example, have underperformed their benchmarks since 2006. Similar statistics are seen in the United States.

In this exclusive conversation with CNBC's Michael Santoli, Buckley, who helps oversee about $4 trillion in investor assets managed by Vanguard, also discusses:

  • Why fees and other costs are investors' biggest enemy.
  • Trends in money flows and where funds are being deployed.
  • How to build a portfolio for retirement and beyond.
  • Investment lessons and principles every market participant must know.