If you're going to be active, you may as well be very active.

That seems to be the major takeaway from a whale of a piece by Barron's writer Sarah Max. The recent cover story details the idea of "active share," which measure how much of a mutual fund's portfolio is different from its benchmark.

While having a high active share doesn't necessarily mean good returns for investors, it does give some indication, according to Mercer US director Terry Dennison. He told Max that "High active share is no guarantee that a fund will outperform, but it is likely a necessary condition. You can't beat the index if you look exactly like it."

PMs who are too close to the benchmark are referred to as "closet benchmarkers."

The very lengthy article goes on to discuss several different funds, including offerings from Fairholme, Fidelity, Artisan, Longleaf and American Funds.

To read the entire article — worth doing if you have some time — click here. 

Edited by: Ben Geier


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