I stumbled across an old article in the the Wall Street Journal profiling an advisor including her model portfolio pictured below.

The advisor's target allocation is 40% domestic equities, 35% bonds (10% of the 35% is foreign), 15% foreign stocks and 10% Alternatives which includes managed futures. Anyone may or may not agree with the allocation but like any allocation this will be fine most of the time but it may make sense to raise cash at different points in the future.

The way the advisor implements the model is problematic. As you can see all of the holdings are actively managed mutual funds. The funds chosen are probably "good" funds. Advisors don't usually pick the worst performers in the group. "The small cap fund I chose for you has lagged its benchmark index and 80% of all small caps for the last ten years," doesn't happen too often.

Boilerplate always warns about past performance but what else can you do? Any buyers of actively managed funds out there go with the active fund that is 15 basis points cheaper or do the take the better track record?

Additionally there is no way to do any sort of forward looking analysis. What will the manager of your active mutual fund want to own one year from now? As the question is unanswerable forward looking analysis is undoable. The potential consequence is that the portfolio owns a bunch of funds where the managers all draw similar conclusions and so invest their funds similarly. This is fine if they are right or a potential deathblow if they are catastrophically incorrect like being overweight tech in 2000 or overweight financials in 2008.

This problem doesn't really have the same consequence with narrow based funds. If a portfolio allocates 15% to an actively managed financial fund and fills out the rest of the portfolio with sector funds then the portfolio isn't going to get caught with 30% in financials. The problem of too much of one sector or not enough of another can occur using actively managed country funds.

Using an actively managed fund as part of a diversified portfolio can certainly make sense but total reliance seems like a problem waiting to happen.