Chart of the Day: Lower Active Shares

Today’s Chart of the Day is from Goldman Sachs and was featured in an article in the Financial Times. It illustrates the trend in “Active Share Vs. Benchmarks" since 2013.

The active share measures the percentage of a portfolio that differs from its benchmark index. For example, a 0% active share means the portfolio mirrors the index exactly, while a 65% active share indicates that 65% of the portfolio is actively managed and deviates from the index.

The chart shows that active share levels are currently near historic lows. This suggests that many active fund managers are increasingly aligning their portfolios with their benchmarks—a practice known as “closet indexing.”

We pay close attention to this trend when evaluating a fund’s fees, historical performance, and potential for diversification.