While many U.S. investors have shifted their holdings from actively managed accounts to passive indexed strategies in an effort to capitalize on recent equity market tailwinds, the relative performance of passive strategies over the past decade doesn't necessarily justify that decision.
A recent study from the University of Notre Dame shows portfolios with higher active shares (meaning little overlap in holdings with their benchmarks) and low turnover (meaning a longer average holdings period for individual investments) have significantly outperformed their more-index-correlated counterparts with lower active share allocations and higher investment turnover rates.
The latest white paper from Baird Equity Asset Management's Value Team illuminates the findings of this study and its implications for investors.
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