Active Share
Definition
A measure of how different a portfolio's holdings are from its benchmark index, ranging from 0% (identical) to 100% (completely different).
Explanation
Active Share was introduced by Cremers and Petajisto in 2009. A fund with Active Share above 80% is considered truly active — its performance will meaningfully differ from the benchmark. Closet indexers (Active Share below 60%) charge active fees while essentially replicating the index. Research suggests high Active Share funds have better odds of outperformance, though results are debated.
Formula
Active Share = (1/2) × Σ |w_portfolio,i - w_benchmark,i|