Active share

What it means

The proportion of a portfolio’s holdings that differs from its benchmark, from 0% for an index fund to 100% for no overlap.

The exam angle

Measures how different a portfolio is; tracking error measures how differently it behaves. A high active share with low tracking error means many small off-benchmark bets that cancel.

Where it appears in the syllabus

• Portfolio ConstructionCFA Level II · exam weight 10–15% · Active management, ETFs, multifactor models, market risk, backtesting.
• Portfolio Management pathwayCFA Level III · exam weight 30–35% · Active equity, yield-curve and credit strategy, LDI, trade execution.

Related terms

• Fundamental law of active managementExpected active return is a function of skill, the number of independent decisions taken, and how fully those…
• Arbitrage pricing theoryA model deriving expected returns from exposures to multiple systematic factors, assuming no arbitrage rather than a…
• Factor investingBuilding portfolios around systematic return drivers — value, size, momentum, quality, low volatility — rather than…
• Multifactor modelA model explaining returns by exposure to several systematic factors rather than to the market alone.
• Style driftA manager gradually moving away from the strategy the mandate describes.
• Derivatives overlayAdjusting a portfolio’s exposures with derivatives while leaving the underlying holdings untouched.