Bernard J. Hank Professor of Finance, Martin J. Gillen Dean of the Mendoza College of Business
K.J. Martijn Cremers joined the University of Notre Dame as Professor of Finance in 2012. Prior to that, he was a faculty at Yale School of Management from 2002 – 2012 after obtaining his PhD in finance from the Stern School of Business at New York University. Hailing from the Netherlands, his undergraduate degree in Econometrics is from the VU University Amsterdam (1993-1997). Professor Cremers' research focuses on empirical issues in investments and corporate governance. His academic work has been published in top academic journals such as the Journal of Finance, the Review of Financial Studies, the Journal of Financial Economics, Stanford Law Review and Northwestern Law Review. His research has also been covered in newspapers like the Wall Street Journal, the Financial Times and numerous others. He is an Associate Editor at the Review of Finance (2010-) and previously was an Associate Editor of the Review of Financial Studies and European Financial Management. At Notre Dame, he teaches courses on investments and corporate governance to MBA and undergraduate students. His paper “How active is your fund manager? A new measure that predicts performance” (published in 2009 in the Review of Financial Studies) introduced a measure of active management named ‘Active Share’, which is based on a comparison of the holdings of a fund with those of its benchmark. The ‘Active Share’ measure has become widely used in the financial industry and has been, for example, incorporated in Morningstar Direct and FactSet.
“Active Share and the Three Pillars of Active Management: Skill, Conviction and Opportunity” Financial Analysts Journal 2017.
This article relates Active Share to the fund manager’s individual stock-picking skill, conviction, and opportunity. I propose a new formula for Active Share that emphasizes that a fund’s Active Share is reduced only through overlapping holdings with its benchmark. I show why and how to adjust the expense ratio for the level of Active Share and the cost of investing in the benchmark. I conclude that Active Share matters for the performance of actively managed funds. Investors should not pay (too) much for low–Active Share funds, which generally underperform. But there is no evidence that high–Active Share funds as a group have underperformed, and patient managers with high Active Share have been quite successful.