The article presents a study about the relationship between industry concentration and the performance of actively managed U.S. mutual funds from 1984 to 2003. It develops a new measure of industry concentration to quantify the amount of portfolio concentration in several industries. The results of the study show that controlling the risk and style differences using factor-based performance measures lead to a better performance of the most concentrated funds. This suggests that investment ability is more evident among managers with portfolios concentrated in a few industries
