Limitations Of Active Share As A Measure Of ‘Activeness’

As investors’ low cost options continue to expand and get more sophisticated (okay, sometimes to a fault) active managers have to work harder to justify their fees. One way that managers can’t prove that they’re not just closet indexers is by having a high active share – a measure of how much a portfolio differs from the chosen benchmark index. But investors should be careful not to rely too much on this single measure because it’s not perfectly comparable between different portfolios. “While active share can give some indication of the level of a portfolio’s activeness, it should be used…