James Dean is creating a portfolio of mutual funds

James Dean is creating a portfolio of mutual funds. His asset allocation is 40% to US bonds and 60% to US equities. In selecting the funds, he has two considerations: (i) large cap equities are priced more efficiently than the small cap firms, and (ii) Diversification of alphas across strategy and fund managers. James has made two different options and wants you to compare them for him: Asset Fund Option 1 Fund Option 2 Large Cap Large Cap index ETF (70%) + large Large Cap Value (40%) + Large Cap Growth Cap Blend (30%) (40%) + Large Cap Index ETF (20%) Small Cap Small Growth (45%) + Small Cap Small Cap Blend (60%) + Small Cap Index ETF Value (45%) + Small ETF (10%) (40%) Please explain which fund option is most suited for the investor.