Active Share
Active Share is a way to measure how different an investment portfolio is from its benchmark index (like the S&P 500). Think of it as a percentage that shows how much a fund manager is doing things differently from simply copying an index. A higher Active Share (like 80-100%) means the manager is making very different investment choices than the index, while a lower number (like 20-30%) suggests they're mostly following the index. This measurement helps people understand if they're paying for true active management or getting something closer to an index fund.
Examples in Resumes
Analyzed portfolio performance and calculated Active Share metrics for client portfolios
Improved fund evaluation process by implementing Active Share analysis
Led team in developing new reporting tools incorporating Active Share measurements
Typical job title: "Portfolio Analysts"
Also try searching for:
Where to Find Portfolio Analysts
Professional Organizations
Online Communities
Job Boards
Example Interview Questions
Senior Level Questions
Q: How would you explain the limitations of Active Share to a client?
Expected Answer: A senior analyst should discuss how Active Share is just one of many metrics to evaluate portfolio management, explain that high Active Share doesn't guarantee better performance, and mention the importance of considering it alongside other factors like tracking error and risk-adjusted returns.
Q: How would you incorporate Active Share analysis into portfolio construction?
Expected Answer: Should explain practical applications of Active Share in building portfolios, discuss how it helps in fee justification, and demonstrate understanding of how it fits into the broader investment decision-making process.
Mid Level Questions
Q: What factors might cause changes in a portfolio's Active Share over time?
Expected Answer: Should be able to explain how market movements, manager decisions, and changes in benchmark composition can affect Active Share, with practical examples.
Q: How do you calculate Active Share and what data do you need?
Expected Answer: Should explain the basic calculation method, identify necessary portfolio and benchmark holdings data, and discuss common challenges in gathering accurate information.
Junior Level Questions
Q: What is Active Share and why is it important?
Expected Answer: Should be able to explain that Active Share measures how different a portfolio is from its benchmark and why this matters for evaluating active management.
Q: What would be considered a high versus low Active Share?
Expected Answer: Should know that above 80% is considered high Active Share, below 60% is considered low, and explain what these different levels typically mean for portfolio management.
Experience Level Indicators
Junior (0-2 years)
- Basic understanding of Active Share calculation
- Portfolio analysis fundamentals
- Basic Excel and data handling
- Understanding of benchmark indices
Mid (2-5 years)
- Advanced portfolio analysis
- Performance attribution
- Investment reporting
- Client communication skills
Senior (5+ years)
- Portfolio construction expertise
- Advanced investment strategy
- Team leadership
- Client relationship management
Red Flags to Watch For
- Unable to explain basic portfolio management concepts
- Lack of understanding of benchmark indices
- No experience with investment analysis tools
- Poor grasp of investment mathematics
Related Terms
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