This paper discusses the difficulties active managers faced in 2006 including sector rotation, valuation compression, and fund flows. The challenges that the 2006 market created are evidenced by looking at the number of active managers that were unable to beat their respective indices in 2006. This paper outlines the EAI universe data and discusses the magnitude by which active managers underperformed and outlines the reasons behind the struggles many managers faced. Additionally, there is commentary on ETF fund flows and their impact on active management.