Active Share is a Measure of Active Management
In 2006, two Yale professors introduced to the investment community a holdings based statistic called Active Share that measures how "different" an equity portfolio is from its benchmark as well as the proportion of a portfolio that is driving performance. The professors determined there was a positive relationship between fund performance and the fund manager's willingness to be different.
Related studies have examined the relationship between manager conviction and the potential for outperformance. Touchstone views high Active Share and high manager conviction, not as a harbinger of definite outperformance, but as indicators that a strategy has the opportunity to outperform. In such context, Active Share can be a valuable element of investment manager evaluation and fund analysis.