This paper examines the relationship between the industry concentration of actively managed U.S. equity mutual funds and their performance from 1984 to 1999. The authors find that more concentrated funds tend to outperform diversified funds after controlling for risk and style differences. This suggests that managers with superior investment abilities may concentrate their holdings in industries where they have informational advantages. The study uses a variety of performance measures, including factor-based models, holding-based measures, and industry-adjusted performance metrics. The results indicate that concentrated funds exhibit better stock selection and style timing abilities. Additionally, the paper finds that concentrated funds tend to outperform diversified funds even after accounting for expenses and macroeconomic factors. The findings support the idea that active fund management can create value through superior investment skills and information advantages. The study also shows that concentrated funds have higher returns on trades, suggesting that they are more successful in selecting securities. Overall, the paper provides evidence that investment ability is more evident among managers who hold portfolios concentrated in a few industries.This paper examines the relationship between the industry concentration of actively managed U.S. equity mutual funds and their performance from 1984 to 1999. The authors find that more concentrated funds tend to outperform diversified funds after controlling for risk and style differences. This suggests that managers with superior investment abilities may concentrate their holdings in industries where they have informational advantages. The study uses a variety of performance measures, including factor-based models, holding-based measures, and industry-adjusted performance metrics. The results indicate that concentrated funds exhibit better stock selection and style timing abilities. Additionally, the paper finds that concentrated funds tend to outperform diversified funds even after accounting for expenses and macroeconomic factors. The findings support the idea that active fund management can create value through superior investment skills and information advantages. The study also shows that concentrated funds have higher returns on trades, suggesting that they are more successful in selecting securities. Overall, the paper provides evidence that investment ability is more evident among managers who hold portfolios concentrated in a few industries.