Another Use for Active Share – Understanding Portfolio Exposures

Journal of Investing Vol 29, Issue 5 (October), 2020 DOI: https://doi.org/10.3905/joi.2020.1.149

Posted: 6 May 2020 Last revised: 25 Sep 2020

See all articles by Simon Elimelakh

Simon Elimelakh

MLC Asset Management

Barry Gillman

Brandes Investment Partners

Geoff Warren

Australian National University (ANU) - Research School of Finance, Actuarial Studies and Statistics

Date Written: September 23, 2020

Abstract

We show how active share can be decomposed into segment and stock-specific exposures to create an active share risk profile. The method is demonstrated for global equity portfolios by attributing active share into contributions from country, sector, stock-specific, and non-equity positions within portfolios. Active share risk profiles can be used to identify the underlying sources of benchmark-relative risk within a portfolio both for a point in time and over time, and to compare the exposures in a portfolio relative to competitors. The method is straightforward to implement and may form a useful part of the toolkit for understanding benchmark-relative risk exposures within actively managed portfolios.

Keywords: Active share, active portfolio management, risk management, portfolio construction

JEL Classification: G11, G23

Suggested Citation

Elimelakh, Simon and Gillman, Barry and Warren, Geoffrey J., Another Use for Active Share – Understanding Portfolio Exposures (September 23, 2020). Journal of Investing Vol 29, Issue 5 (October), 2020 DOI: https://doi.org/10.3905/joi.2020.1.149, Available at SSRN: https://ssrn.com/abstract=3572474 or http://dx.doi.org/10.2139/ssrn.3572474

Simon Elimelakh

MLC Asset Management ( email )

255 George Street
Sydney, NSW 2000
Australia

HOME PAGE: http://https://www.mlcam.com.au/

Barry Gillman (Contact Author)

Brandes Investment Partners ( email )

11988 El Camino Real, Suite 600
San Diego, CA 92130
United States

Geoffrey J. Warren

Australian National University (ANU) - Research School of Finance, Actuarial Studies and Statistics ( email )

CBE Building 26C
Kingsley Sreet, Acton
Canberra, ACT 0200
Australia

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