(Harvest) If there is a lot of overlap between your portfolio and the market, there is only so much alpha you can earn. This is obvious. Still, when you visualize this potential it sends a powerful message. Active share—the preferred measure of how different a portfolio is from its benchmark—is not a predictor of future performance, but it is a good indicator of any strategy’s potential excess return. As you’ll see below, the higher your active share, the more extreme your performance can be, good and bad.
The More Unique Your Portfolio, The Greater Its Potential
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