3 Funds Are Pulling Their Punches
These funds are getting less active.
When purchasing an actively managed mutual fund, investors want to make sure they're getting their money's worth. Active managers on average charge higher expenses than passive products, such as index mutual funds or exchange-traded funds, and, accordingly, their funds' portfolios are expected to be distinct from their bogies, with a better chance of outperforming their benchmark. There are several metrics that can help investors evaluate how distinct their funds are, from returns-based statistics such as R-squared, to those based on holdings, such as active share (for more background on active share, check out this article). When these metrics show an active fund is becoming more correlated with its index, it can be a warning sign to investors that their fund may be losing some of its edge.
Recently, a few funds stood out with a decreasing active share, indicating a higher percentage of their portfolios now overlap with their respective index. While these funds may not be transforming into closet index-huggers, a closer alignment with their index can be a tip-off for investors that the active portion of their own portfolio is decreasing.
Kathryn Spica, CFA does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.