Abstract

https://ssrn.com/abstract=2498743
 


 



Patient Capital Outperformance: The Investment Skill of High Active Share Managers Who Trade Infrequently


Martijn Cremers


University of Notre Dame

Ankur Pareek


Rutgers University

December 1, 2015

Journal of Financial Economics (JFE), Forthcoming

Abstract:     
Among high Active Share portfolios – whose holdings differ substantially from their benchmark – only those with patient investment strategies (with holding durations of over 2 years) on average outperform, over 2% per year. Funds trading frequently generally underperform, including those with high Active Share. Among patient funds, separating closet index from high Active Share funds matters, as low Active Share funds on average underperform even with patient strategies. Our results suggest that U.S. equity markets provide opportunities for longer-term active managers, perhaps because of the limited arbitrage capital devoted to patient and active investment strategies.

The online appendix to this paper is available at http://ssrn.com/abstract=2498743.

Number of Pages in PDF File: 70

Keywords: Performance, Active Share, Mutual Funds, Institutional Portfolios, 13F, Fund Duration, Turnover

JEL Classification: G12, G24


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Date posted: September 21, 2014 ; Last revised: July 21, 2016

Suggested Citation

Cremers, Martijn and Pareek, Ankur, Patient Capital Outperformance: The Investment Skill of High Active Share Managers Who Trade Infrequently (December 1, 2015). Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: https://ssrn.com/abstract=2498743 or http://dx.doi.org/10.2139/ssrn.2498743

Contact Information

K. J. Martijn Cremers (Contact Author)
University of Notre Dame ( email )
P.O. Box 399
Notre Dame, IN 46556-0399
United States
Ankur Pareek
Rutgers University ( email )
1 Washington Park
Newark, NJ 07102
United States
973-353-1646 (Phone)
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