In order to improve performance, advocates of active management have begun to argue that managers should focus exclusively on their best ideas, holding more concentrated portfolios of securities in which they have the highest confidence. In contrast, we argue that if it becomes popular, such “high conviction” investing is likely to: increase risk, make manager skill harder to detect, raise asset owners’ costs, and reduce the number of outperforming funds.
Edwards, T. & Lazzara, C. 2016, 'Fooled by Conviction', S&P Dow Jones Indices research
