I recently ran across this blog post by Jason Zweig on WSJ.com.  His premise is that claims of investing in inefficient markets as a course to superior performance are not justified.  As he points out, Standard & Poor's research indicates that fund managers are no more successful in outperforming an appropriate benchmark in inefficient markets than are those in efficient markets.

While it may seem that inefficient markets should offer more and greater opportunities for excess return, those same factors creating the inefficiencies will militate against consistent outperformance.  Fewer and less sophisticated market participants will reduce the probability that a mispriced asset recognize its true value within a time frame that justifies its purchase.  Ultimately, any perceived excess return is most likely the result of an unrecognized risk factor, such as illiquidity.

Recognize that this a critique of the assumption that an inefficient market will benefit an active manager.  Many of these markets add value to the portfolio just through exposure, either through return enhancement or risk reduction.  To add value through active management in these capital market sectors, a manager must exhibit the ability to recognize many opportunities and to convert a high percentage of them into profitable transactions.