How much active management is being done by your mutual fund manager? Active Share may give you the answer. Active Share is a measure of the percentage of stock holdings in a manager's portfolio that differs from the benchmark index. The researchers conclude managers with high Active Share outperform their benchmark indexes and Active Share significantly predicts fund performance.
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The most active stock pickers outperformed their benchmark indices even after fees, whereas closet indexers underperformed. These patterns held during the —09 financial crisis and within market-cap styles. Closet indexing has increased in both volatile and bear markets since Cross-sectional dispersion in stock returns positively predicts performance by stock pickers.
Antti Petajisto is a researcher and portfolio manager at quantPORT, a systematic multi-strategy asset manager and formerly the proprietary trading desk of Jefferies.
His academic research includes the development of the Active Share concept for quantifying active portfolio management, performance evaluation of money managers, pricing inefficiencies in exchange-traded funds, and the price impact of passive indexing strategies.
Privacy Settings. Save Settings. Abstract Using Active Share and tracking error, the author sorted all-equity mutual funds into various categories of active management. Categories Investment Funds.
Active Share Measures Active Management
Inefficiencies in the Pricing of Exchange-Traded Funds. January published version working paper. Financial Analysts Journal , , 73 1 lead article. Note: The data have been fully refreshed, adding 4 more years to the earlier sample.
Active Share and Mutual Fund Performance
Skip to search form Skip to main content You are currently offline. Some features of the site may not work correctly. DOI: I sort domestic all-equity mutual funds into different categories of active management using Active Share and tracking error.