Active Share Efficiency

Active Share measures the proportion of holdings in an equity portfolio that differ from the strategy’s benchmark. When initially researched, Active Share was found to be correlated with managers’ outperformance, but its application has been expanded, and it is now widely used by investors and managers alike to evaluate and compare active management across strategies.

We propose a new measure called Active Share Efficiency, building on Active Share by taking into account managers’ excess returns. Active Share Efficiency is thus able to assess the effectiveness of managers’ active positions and provide a standardized comparison across managers at all levels of Active Share.

Read this whitepaper to learn more about:

  • The origins of Active Share, its characteristics and uses today
  • Active Share as a useful metric for manager selection/monitoring
  • Active Share Efficiency and how it compares to Active Share