Are Specialists ‘Special’?

Common asset holdings have received a lot of attention recently, but little is known about how overlapping investors' portfolios are in the real world. Using data on U.S. mutual funds' equity portfolios for the period 2003-14, we document a strong and significant overlap in the average pair of funds' portfolios. Our main contribution is to show that this portfolio overlap is an important reason for why it is difficult to detect investors with superior performance. While specialized funds (those with concentrated portfolios) indeed appear to emphasize certain stock-specific characteristics, we find that their performances are not significantly different from those of diversified funds. Overall, these findings suggest that specialist investors are not that special.