Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
This is so true in large cap domestic and international stock funds. Folks often think active share means how much turnover a fund has. But it really has to do with how different the fund's holdings are from its benchmark. Typically of M* to not make the information available except to subscribers of its most expensive software. But also understand that the fund's benchmark (as stated in the prospectus and/or annual report) might be different than what M* uses. Using active share statistics to compare similar funds is one thing. But keep in mind that some great funds are not style-box driven. OSTFX, for example, uses the S&P 500 benchmark, but it only has about 40 holdings, and more than 50% are in mid-and-small cap stocks. Average market cap, in this case, does not help much. Same for GSRLX, which has only 50 holdings, but 20% is in MLPs, and about 15% is in foreign stocks. So it's pretty clear this fund's active share number is very high compared to the Russell 1000 Growth, but the fund is definitely not even remotely similar to that index.
There are, however, any number of large cap funds that get a lot of cash flow but provide very little benefit, often none at all, over an index fund. It seems clear to us that smaller funds with concentrated portfolios, usually style-box agnostic, are often the best options for investors wanting real active management.
Primecap does this with their Growth fund POGRX. Depending on the environment--- if the prices and growth prospects are better--- they will take a significant chunk of their portfolio and invest in the MC space. If you get a good spot, it can be a good thing (although, you may have to wait awhile for the market to rotate into the sector(s) they chose, to get the extra oomph).
Comments
There are, however, any number of large cap funds that get a lot of cash flow but provide very little benefit, often none at all, over an index fund. It seems clear to us that smaller funds with concentrated portfolios, usually style-box agnostic, are often the best options for investors wanting real active management.