Alex Bryan, CFA, is director of passive strategies for North America at Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. Before assuming his current role in 2016, Bryan spent four years as a manager analyst covering equity strategies. Previously, he was a project manager and senior data analyst in Morningstars Data department. He joined Morningstar in 2008 as an inside sales consultant for Morningstar Office.

Bryan holds a bachelors degree in economics and finance from Washington University in St. Louis, where he graduated magna cum laude, and a masters degree in business administration, with high honors, from the University of Chicago Booth School of Business. He also holds the Chartered Financial Analyst®designation. In 2016, Bryan was named a Rising Star at the 23rd Annual Mutual Fund Industry Awards.

Morningstar ETFInvestor scans the globe for value and improving fundamentals across virtually all asset classes. Editor Alex Bryan draws upon academic and practitioner research including Morningstars sizeable bench of stock, bond and fund analysts to find reliable drivers of outperformance.

Morningstar ETFInvestor features four model portfolios.

The Basic Portfolio harnesses the markets collective wisdom with ultra-low-cost funds and is the baseline portfolio against which the three other portfolios will be compared.

The Defensive Portfolio aims to provide lower volatility, better downside protection, and better risk-adjusted performance than the basic portfolio over the long-term.

The Factor Portfolio is designed to earn higher returns than the basic portfolio over the long-term.

The Income Portfolio attempts to earn a higher distribution yield than the basic portfolio, without taking a lot more risk.

Director of Passive Strategies for North America and EditorAlex Bryan, CFA, is director of passive strategies for North America at Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. Before assuming his current role in 2016, Bryan spent four years as a manager analyst covering equity strategies.Previously, he was a project manager and senior data analyst in Morningstars Data department. He joined Morningstar in 2008 as an inside sales consultant for Morningstar Office.

Active stock managers of all stripes have had trouble beating representative benchmarks over the long term. That said, there is an argument that high conviction managers stand a better chance of success. It seems intuitive that a highly concentrated portfolio would improve performance by increasing exposure to a managers best ideas. But the results of a recent study I published suggest there is no significant link between portfolio concentration and performance (gross of fees).

Why not? A minority of stocks have historically driven most of the markets returns, and increasing portfolio concentration increases the risk of missing out on these big winners, which can exceed the benefit of avoiding the markets many losers. This effect appears to offset the benefit of increasing exposure to a managers best ideas.

While performance isnt linked to portfolio concentration, fees are. More highly concentrated managers tend to charge more. And the risk of manager selection increases with portfolio concentration. More highly concentrated portfolios have a wider range of potential returns.

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