Active Is as Active Does: Wading Into the Active-Share Debate

An increasing proportion of asset owners and investment consultants require managers to report the active share of their portfolios. Active share as a concept was introduced to the investment community in a 2009 paper by Cremers and Petajisto. It is a metric that presumes to measure how active a portfolio is. The underlying idea is that the closer a manager is to his or her benchmark, the smaller the degree of potential outperformance, and therefore the less likely that fees can be justified (or the more likely the manager is a closet indexer). But is active share the right measure for achieving this worthy objective?

Dieter Vandenbussche 
Vishv Jeet 
Sebastian Ceria 
Melissa Brown