Active share

Active share measures how different a fund's holdings are from the holdings of its benchmark index, expressed as a percentage from 0 to 100. A fund with an active share of 0 owns exactly the same stocks in the same weights as its benchmark, while a fund with an active share of 100 owns nothing the benchmark owns.

The number is calculated by comparing the weight of each holding in the fund against the weight of that same holding in the benchmark, summing the differences, and dividing by two. A fund manager who claims to run an active strategy but shows an active share well below what genuine active management would suggest is often described as a closet indexer, someone charging active management fees while running a portfolio that barely differs from the index it is measured against.

Investors and researchers use active share alongside tracking error to separate two different questions about a fund, how differently it is positioned from its benchmark, and how differently its returns have actually behaved. A high active share does not guarantee outperformance, it only shows the manager is taking real bets rather than hugging the index, and those bets can go either way.