There are a number of challenges.

  1. It is usually unclear what the managers' benchmark index is.
  2. The index may have 500 - 3000 stocks, but the manager can only hold 20-50, so that will naturally create many "active bets", but those may not really be "bets", only oweing to the fact that he cannot hold every stock.
  • $\begingroup$ Are you familiar with activeshare.info ? Try it with, for example, FCNTX $\endgroup$
    – Alex C
    Jun 17, 2017 at 5:13
  • $\begingroup$ @AlexC: yes, and this (aqr.com/~/media/files/papers/aqr-deactivating-active-share.pdf) as well. Not sure what exactly to make of their methodology. Have you tried it yourself? $\endgroup$ Jun 17, 2017 at 5:15
  • $\begingroup$ What is the difference between a manager's picks and his/her holdings? $\endgroup$
    – amdopt
    Jun 18, 2017 at 10:12
  • 1
    $\begingroup$ In theory the person with zero information holds the market portfolio. So when you see someone who does not hold the market portfolio you can say: Aha! This person believes he has infomation/skill and has picked (selected) stocks accordingly. The question then is what can you do with his holdings to compare them to mkt and come up with an objective mathematical description of how far he deviates from the zero information portfolio. (In particular this would be very useful to detect "closet indexers" who pretend to pick stocks but have a mishmash practically undistinguishable from mkt pfolio). $\endgroup$
    – Alex C
    Jun 18, 2017 at 18:53
  • 1
    $\begingroup$ A friend of mine (the late Ross Miller) claimed that the investor should only be paying 'active mgmt fee' to a MF to the extent the MF $R^2$ to market is not equal to 1. papers.ssrn.com/sol3/papers.cfm?abstract_id=746926 So that is another (perhaps simpler) way to get at this problem. (Never mind the exact holdings, just look at the $R^2$ of those holdings). "Active Share" is more complicated, and is also controversial, with several papers criticizing it; I have not looked at it enough to form an intelligent opinion. $\endgroup$
    – Alex C
    Jun 18, 2017 at 19:24

2 Answers 2


I would like pile on with the recommendations for using activeshare.info. However, active share data is only available for mutual funds, so the use cases are limited.

As your question title implies, "detecting" a managers active bets is a function of differentiating them from passive bets.

From Investopedia entry on 13-F "Alpha Cloning":

Portfolio managers can't pick stocks - this is a common saying in popular press and between proponents of index investments. But research shows it is not such an evident truth. Mutual/hedge fund managers in reality can pick stocks but are often too diversified and their "best picks" therefore cannot deliver such a spectacular performance as fund's performance is dragged down by rest of the portfolio. The 13F Fillings Following system is based on assumption that stocks in which mutual fund managers (and hedge fund managers) are mostly concentrated (their best ideas) are stocks which will outperform the broad equity index. SEC 13F fillings could be used to track top holdings positions in mutual funds.

When an appropriate benchmark is ambiguous (as is often the case for the general case of active management), treating every fund as its own benchmark overcomes the biases you mention in (1) and (2). This benchmark holds every stock in the manager's portfolio and weights each holding "passively". Passive weighting in this context usually means public float adjusted, since this requires also no active management and is what is reflect in most major indices. "Passive" can also be more broadly interpreted to mean any weighting schema which does not involve active bet sizing (e.g., equal weighting).

Treating each portfolio as it own benchmark gets around the issue of identifying active weighting. This method is most robust for funds with diversified holdings ($\ge 30 ???$) However, it is limited due to the fact that skill also involves active selection.


To detect fund manager's active stock picks from his portfolio holdings you need the managers' benchmark index. Check the fund fact sheet for this. Fund Rating Agencies often use a broad well-known index, but that index often does not fit to the origin fund investment approach. An American US Value oriented fund can consequently outperform his own index, but simultaneously underperform the broad main index. Therefore, the best way is to ask the fund company for an attribution analysis. The attached example shows the active bets.


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