The New York attorney general’s office has reached agreement with 13 mutual fund companies to make public disclosure of their funds’ active share.
Active share measures an active mutual fund’s overlap with an underlying index.
The attorney general’s offices surveyed 14 major U.S. mutual fund firms and found that 13 did not disclose the active share metric to investors, even though all of them disclosed it to some extent to institutional investors.
The lack of equal access “is an information gap that hinders retail investors’ ability to fully analyze the potential value proposition of an actively managed equity fund,” the attorney general’s office said in a report, released Thursday.
How useful the metric is, though, is debatable. In a 2016 report, Russ Kinnel, director of manager research at Morningstar, found that the active-share measure had no meaningful ability to predict performance.
Morningstar reports the metric in some of its products, and uses it to watch for managers changing strategy, Kinnel said.
Investment Company Institute Paul Schott Stevens faulted New York for mandating the disclosures.
“We strongly believe state authorities should not arrogate to themselves the authority to impose inconsistent disclosure requirements,” he said in a statement, noting that the SEC does not require disclosure of active share.
The mutual fund firms that have agreed to publish active share information under the agreement with New York are: AllianceBernstein LP; BlackRock Inc.; The Dreyfus Corp.; The Capital Group Companies Inc. (American Funds); Columbia Management Investment Advisors LLC; Eaton Vance Management; Goldman Sachs Asset Management L.P.; JP Morgan Chase & Co.; OppenheimerFunds Inc.; Nuveen LLC; T. Rowe Price Associates Inc.; USAA Asset Management Co.; and The Vanguard Group Inc.
Most of the firms that have agreed to post the information beginning in spring 2018, the attorney general’s office said.