As passive investing continues to gain momentum in the marketplace, a recent Bloomberg article suggests that active investors might find a “lifeline” in smaller, more focused portfolios.

“Institutional investors are raising their allocations to so-called focused strategies–” the article reports, “–defined as portfolios holding 50 names or fewer—and distributors are increasingly recommending them to clients.” The findings came from a study conducted by Greenwich Associates in conjunction with Fred Alger Management Inc. that analyzed funds flow decisions of 91 “key decision makers” from September to November of 2017. Of those questioned, the article reports, “more than half of the institutional investors said they’d increased their allocations to focused strategies in the previous 18 months, and the same amount expected their interest to grow over the next two years.”

The logic behind the trend, the article explains, is that “these tightly focused portfolios hold the stocks the investment managers most believe in, which will induce outperformance. In addition, these smaller groups should deviate further away from indexes than so-called benchmark huggers, which have large holdings that all but match the index they’re chasing. If the strategies are more differentiated—what asset managers call ‘active share’—they also should have a better chance of outperforming passive indexing. Or so the thinking goes.”