Average holdings are on the increase

The average number of stocks in a mainstream active portfolio has been trending up over the course of the past decade, driven both by increases in stock volatility and the rise of tracking error as a risk assessment tool. Twenty years ago, academics concluded that as few as 25 to 30 stocks produced a fully diversified portfolio and indeed it was maintained that after the first 15 stocks, each new addition to a portfolio added a decreasing level of diversity. Academic research relating to any aspect of investment funds must be taken with a measure of scepticism. All such work is based on...