Active Share - Much Ado About Little

Published 20-Feb-2015

A once-obscure measurement of the level of portfolio managers’ active management has moved front and center in the debate over performance and fees. State Street Global Advisors’ (SSGA) Chief Portfolio Strategist, Lori Heinel, separates the hype from the facts.

When “active share” first gained popularity nearly a decade ago, the concept seemed simple enough. The measurement was designed to determine how similar or different a portfolio is from its benchmark. There was also research at the time suggesting it could predict performance—research that has since come under question.

Recently, however, regulators in Europe have seized on active share as a kind of litmus test of which active managers are justified in charging higher fees. For this and other reasons, a number of portfolio managers on both sides of the Atlantic have begun to reveal their active share figures.

Here, Lori Heinel, State Street Global Advisors’ Chief Portfolio Strategist, sets the record straight concerning active share, discussing its merits and its limitations...

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