Finding Winners in Actively Managed Mutual Funds (Podcast)
In 2009, K. J. Martijn Cremers and Antti Petajisto published an article in the Review of Financial Studies about a new measure of active management that they called “Active Share.” (CFA Institute published a summary of their work in the CFA Digest.)
Petajisto, vice president of the multi-asset strategies group at BlackRock, expanded on that work with an article in the July/August 2013 issue of the Financial Analysts Journal, “Active Share and Mutual Fund Performance,” in which he uses Active Share and tracking error to analyze actively managed mutual funds. Rodney Sullivan, CFA, head of publications at CFA Institute and editor of the FAJ, talked with Petajisto about his recent research as part of our FAJ author interview series.
“Ultimately,” Petajisto says, “this is about fund performance.” He says that “as an active fund, you can only outperform if you deviate from the index,” and he set out to examine those deviations. Research has shown that the average actively managed mutual fund underperforms a low-cost index fund after accounting for fees and expenses, but Petajisto quantifies the size of active positions and distinguishes between different types of active managers.
To hear Petajisto discuss his methods and findings, listen to the full interview above or download the MP3. Petajiso will also review his finding in a free, live webinar on 28 October 2013 at 1:00 pm EDT.
CFA Institute members can read the full article on the CFA Publications website.
Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.