Six limitations: Henderson takes on the Active Share debate

  Active Share is a measure of the percentage of equity holdings in a manager's portfolio that differ from the benchmark index. The term was coined in 2006 by Martijn Cremers and Antti Petajisto of the Yale School of Management. Looking at 2,650 funds from 1980 to 2003, Cremers and Petajisto found the highest ranking active funds, those with an Active Share of at least 80%, beat their benchmarks by 2%-2.71% before fees and by 1.49%-1.59% after fees. The measure also claims to identify 'closet indexers' - managers who say they are active but whose portfolios are made up very simi...