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Active Share vs. Active Risk

And the winner is… 


Melissa Brown
Managing Director of Applied Research  

What is active share? What is active risk? 

There are various ways to measure whether a manager is taking on enough risk in the portfolio to be able to beat an index, which should be of critical concern to anyone investing with that manager. Two of the most popular metrics are active share and active risk (also known as tracking error). These terms are good shorthand indicators for determining if a portfolio is sufficiently different from an index to warrant the extra fees.  

However, while both terms measure differences between the portfolio holdings and the benchmark, only active risk takes into account the volatilities of the assets and how they are correlated. 

With this report, you will:  

  • Learn about the pros and cons of both active share and active risk.  
  • Take a deep dive into sample portfolios that demonstrate the key differences between these two portfolio indicators.    
  • Discover the role that portfolio optimization tools can play in constructing an efficient portfolio. 
  • Understand why active risk is the measure to follow for portfolio managers and risk managers.  


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