Active Share and the Predictability of the Performance of Separate Accounts

40 Pages Posted: 20 Apr 2020 Last revised: 15 Sep 2021

See all articles by Martijn Cremers

Martijn Cremers

University of Notre Dame; ECGI

Jon A. Fulkerson

University of Dayton

Timothy B. Riley

University of Arkansas - Department of Finance

Date Written: September 15, 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

Cremers, K. J. Martijn and Fulkerson, Jon A. and Riley, Timothy Brandon, Active Share and the Predictability of the Performance of Separate Accounts (September 15, 2021). Available at SSRN: https://ssrn.com/abstract=3574654 or http://dx.doi.org/10.2139/ssrn.3574654

K. J. Martijn Cremers

University of Notre Dame ( email )

P.O. Box 399
Notre Dame, IN 46556-0399
United States

ECGI ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Jon A. Fulkerson

University of Dayton ( email )

300 College Park
Dayton, OH 45469
United States

Timothy Brandon Riley (Contact Author)

University of Arkansas - Department of Finance ( email )

Fayetteville, AR 72701
United States

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