Add the Polen Score to Your Statistical Toolkit
Active share has been increasingly embraced by the investment community for its ability to identify portfolios with the potential to outperform their benchmarks. But in theory, an equity manager who looks nothing like their benchmark can still own low-quality companies that ultimately produce poor investment returns. Decision-makers can enhance their use of active share and their statistical toolkit for evaluating portfolios with the Polen Score. Research shows that the combination of downside capture and active share is a more meaningful contributor to relative outperformance than active share alone. The Polen Score marries active share with downside capture ratio using a simple formula and could help to evaluate a portfolio’s ability to generate alpha over time.
Stephen Atkins, CFA, Portfolio Strategist & Analyst, Polen Capital
Peter Holt, Data Analyst, Polen Capital
Stan C. Moss, CFA, CEO, Polen Capital