'Active share is crucial – not concentration'

Active share is a much more important component in gener-ating alpha than stock concen-tration, T. Rowe Price’s Scott Berg argues. Berg, manager of the group’s Global Growth Equity Fund, says putting the benchmark to one side is vital to extracting returns in today’s market environment.

"Some argue that you have to have a highly concentrated portfolio to generate alpha. By contrast, we believe that such an argument confuses portfolio concentration with active share. In our view, it is active share, not concentration, that is most im-portant,” Berg explains.

Geographical diversification

“Therefore, while the strategy has around 140 stocks in 32 countries, we still deliver a very active portfolio with approxi-mately 87% active share. “This approach has allowed the Global Growth Equity Fund to generate meaningful alpha over time but without taking exces-sive factor or individual stock risk that can come with more concentrated approaches.”