Active share a. measures the fraction of portfolio Based on position weighting which differs from the benchmark index. The active stock remedy was developed by Martijn Kramers and Anti Petajisto, both Yale professors.
A scheme whose active share is less than 60% is actually an index hugger. Most of the active funds in the world have become closet indexers.
SAMCO believes that 21 out of 24 schemes in the flexi cap space in India are index huggers. Of the Rs 1.93 lakh crore, flexicap schemes manage 65% or Rs 12,500 crore, which is in the same proportion as the index.
The fund house recently got regulatory approval to launch its mutual fund schemes. “One of the primary reasons why active funds underperform their indexes is that the average equity fund manager owns too many stocks and actually tracks the index,” says Jimit Modi, founder, Samco Asset Management. Because of this, Jimit believes investors get less than an index fund manager’s fees and this structure makes underperformance against the index inevitable. This phenomenon is known as closet indexing or index hugging.
Samco Mutual Fund Will soon launch Flexicap Fund, Global Active Fund and Tax Saving Fund. A daily active share disclosure will let investors know when they are paying an active fee to buy something widely different from the index.