Active Share and the Predictability of the Performance of Separate Accounts

Cremers, Martijn; Fulkerson, Jon A.; Riley, Timothy B.

doi:10.2139/ssrn.3574654

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Active Share and the Predictability of the Performance of Separate Accounts

Financial Analysts Journal, forthcoming

40 Pages Posted: 20 Apr 2020 Last revised: 18 Oct 2021

See all articles by Martijn Cremers

Timothy B. Riley

University of Arkansas, Fayetteville - Department of Finance

Date Written: October 18, 2021

Abstract

Separate accounts are a large and unique, but understudied, part of the investment management industry. Within our sample, on net, the average separate account underperforms, but for those with high active share, we find positive performance persistence. Among high active share separate accounts, a portfolio of those with strong past performance has a subsequent net alpha of 1.38% per year (t-stat = 2.11). That result strengthens when return dispersion is high and among separate accounts with a small cap style, a fundamental investment approach, or lower cash holdings. These results provide out of sample support for the predictive utility of active share.

Keywords: active share, separate account, mutual fund, alpha, performance, persistence, out-of-sample, predictability

Suggested Citation: Suggested Citation

Cremers, K. J. Martijn and Fulkerson, Jon A. and Riley, Timothy Brandon, Active Share and the Predictability of the Performance of Separate Accounts (October 18, 2021). Financial Analysts Journal, forthcoming, Available at SSRN: https://ssrn.com/abstract=3574654 or http://dx.doi.org/10.2139/ssrn.3574654