A large number of high conviction or "concentrated" equity funds have been released in recent years, all promising higher returns than traditional funds by focusing on the strongest stock selection ideas of a manager. This paper examines the evolution of high conviction funds, looking at why they have been developed, their risk/return characteristics and the broader implications for portfolio management.

High conviction funds have posted higher returns than traditional funds, but the wide dispersion between the returns of different funds means that manager selection and evaluation is critically important. A solution is to gain high conviction exposure through a ...