Active Share Can Be Useful, But It’s Not a Silver Bullet
It measures differences, but differences aren’t the same as skill.
New York Attorney General Eric Schneiderman recently announced that 13 fund companies had voluntarily agreed to disclose a measure called "active share" to retail investors. In a press release heralding the agreement, Schneiderman stated, "These new disclosures will give Main Street investors access to critical information before making investment decisions for themselves and their families."
That invites an obvious question: Is active share really critical to investment decisions? The short answer is that while it can be useful, it's probably not a must-have, as further explained below.
Jeffrey Ptak does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.