The team up in Broomhall, PA do a lot of things well, two of those things we’ll note today: Driveway hoops sessions and an awesome tool for advisors called Visual Active Share.
Very simply, active share is defined as the percentage of holdings in a portfolio that differs from its benchmark. Higher active share equals greater difference from the benchmark and vice versa. Visual Active Share has the ability to either expose closet indexers or confirm that a fund is in fact different and delivering exposure it says it is.
Often times, investors perceive diversification as quantity of holdings, but owning 27 different funds does not mean you’re diversified. We elaborate on that thought here, True Diversification. Chances are there’s quite a bit of overlap, so understanding the process and exposures of what you own is vital. Visual Active Share actually plots out each holding of the underlying ETF based on inputs you designate for the x and y axis, allowing the advisor to compare multiple ETF’s when constructing a truly diversified portfolio solution for their clients.
A great tool and one worth highlighting. Go check it out.