Active Share and Private Equity

Abstract

Oyster cites academic research indicating that stock-picking investment managers who have a willingness to deviate from their benchmark, those with “high active share,” have been more likely to outperform than their benchmark-hugging “closet indexer” counterparts. Additionally, the high active share managers who exhibit strong conviction by holding their names for long periods of time have been among the best performers. Oyster also highlights private equity as a potential source for market outperformance, though cautioning that the flood of private equity commitments that must be put to work by managers may diminish future returns. More so than nearly every other category, manager selection in private equity, Oyster surmises, is critical.