IDEAS home Printed from
   My bibliography  Save this article

Portfolio Concentration and Investment Manager Performance




This study examines the relationship between investment performance and concentration in active equity portfolios. Active management is dependent on the success of two important components in the investment process – stock selection skill and portfolio management. Our study documents a positive relationship between fund performance and portfolio concentration. The relationship is stronger for stocks in which active managers hold overweight positions, as well as for stocks outside the largest 50 stocks listed on the Australian Stock Exchange (ASX). We find that more concentrated funds tend to be those implementing growth styles, having smaller aggregate assets under management, being institutions that are not affiliated with a bank or life‐office entity, whose funds experience past period outflows, and who are benchmarked to narrower indexes than the S&P/ASX 300.

Suggested Citation

  • Simone Brands & Stephen J. Brown & David R. Gallagher, 2005. "Portfolio Concentration and Investment Manager Performance," International Review of Finance, International Review of Finance Ltd., vol. 5(3‐4), pages 149-174, September.
  • Handle: RePEc:bla:irvfin:v:5:y:2005:i:3-4:p:149-174
    DOI: 10.1111/j.1468-2443.2006.00054.x

    Download full text from publisher

    File URL:
    Download Restriction: no


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Lang, Gunnar & Shen, Yu & Xu, Xian, 2014. "Chinese pension fund investment efficiency: Evidence from CNCSSF stock holdings," ZEW Discussion Papers 14-007, ZEW - Leibniz Centre for European Economic Research.
    2. Daniel Buncic & Jon E. Eggins & Robert J. Hill & David Gallagher, 2015. "Measuring fund style, performance and activity: a new style-profiling approach," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 55(1), pages 29-55, March.
    3. Scott Bennett & David R. Gallagher & Graham Harman & Geoffrey J. Warren & Yuki Xi, 2018. "A new perspective on performance persistence: evidence using portfolio holdings," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 58(1), pages 91-125, March.
    4. Frieder Meyer-Bullerdiek, 2018. "Portfolio rebalancing versus buy-and-hold: A simulation based study with special consideration of portfolio concentration," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 8(5), pages 1-4.
    5. Suresh Nallareddy & Maria Ogneva, 0. "Accrual quality, skill, and the cross-section of mutual fund returns," Review of Accounting Studies, Springer, vol. 0, pages 1-40.
    6. Hiraki, Takato & Liu, Ming & Wang, Xue, 2015. "Country and industry concentration and the performance of international mutual funds," Journal of Banking & Finance, Elsevier, vol. 59(C), pages 297-310.
    7. Daniel Buncic & Jon E. Eggins & Robert J. Hill, 2010. "Mutual Fund Style, Characteristic-Matched Performance Benchmarks and Activity Measures: A New Approach," University of St. Gallen Department of Economics working paper series 2010 2010-20, Department of Economics, University of St. Gallen.
    8. Feng Dong & John A. Doukas, 2019. "The payback of mutual fund selectivity in European markets," European Financial Management, European Financial Management Association, vol. 25(1), pages 160-180, January.
    9. Cao, Ying & von Reibnitz, Anna & Warren, Geoffrey J., 2020. "Return dispersion and fund performance: Australia – The land of opportunity?," Pacific-Basin Finance Journal, Elsevier, vol. 60(C).
    10. Hitesh Doshi & Redouane Elkamhi & Mikhail Simutin, 2015. "Managerial Activeness and Mutual Fund Performance," Review of Asset Pricing Studies, Oxford University Press, vol. 5(2), pages 156-184.
    11. Kingsley Fong & David R. Gallagher & Adrian D. Lee, 2009. "The Value of Alpha Forecasts in Portfolio Construction," Australian Journal of Management, Australian School of Business, vol. 34(1), pages 97-121, June.
    12. Andrew Ainsworth & Kingsley YL Fong & David R Gallagher & Graham Partington, 2016. "Institutional trading around the ex-dividend day," Australian Journal of Management, Australian School of Business, vol. 41(2), pages 299-323, May.
    13. Suresh Nallareddy & Maria Ogneva, 2017. "Accrual quality, skill, and the cross-section of mutual fund returns," Review of Accounting Studies, Springer, vol. 22(2), pages 503-542, June.
    14. Ekholm, Anders G., 2012. "Portfolio returns and manager activity: How to decompose tracking error into security selection and market timing," Journal of Empirical Finance, Elsevier, vol. 19(3), pages 349-358.
    15. Herrmann, Ulf & Rohleder, Martin & Scholz, Hendrik, 2016. "Does style-shifting activity predict performance? Evidence from equity mutual funds," The Quarterly Review of Economics and Finance, Elsevier, vol. 59(C), pages 112-130.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:irvfin:v:5:y:2005:i:3-4:p:149-174. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley Content Delivery). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.