Active Management

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Active Management

The opposite of passive management. The passive manager simply minimizes the tracking error of their portfolio and a well known index (e.g. S&P 500 index mutual funds). The active manager will deviate from the benchmark weights by (i) varying the weights from the benchmark weights on the securities; (ii) adding securities outside the benchmark or choosing not to hold securities included in the benchmark and (iii) time-varying asset allocation where weights on certain asset classes change through time. The goal of active management is to produce a return that exceeds the passive return with minimal risk.

Active Management

The practice of a money manager or a team of money managers making investment decisions on what securities to include in a mutual fund or portfolio. Sometimes active management exists within certain parameters; for example, money managers may only buy blue-chip stocks for a certain fund and growth stocks for another. The basic premise of active management, however, states that the managers can maximize the return for investors by buying or selling securities on a fairly regular basis. See also: Passive management, Indexing.
References in periodicals archive ?
Further, based on public information and Apache's historic financial and operating underperformance, the proposed transaction offered shareholders of both companies numerous value-creation opportunities given Anadarko's demonstrated success at building value through operational excellence, proven capital allocation, and active portfolio management.
Forward-looking investments and active portfolio management are fundamental to the competitiveness of BASF SE.
At present, the repertoire of strategic adjustments is clearly dominated by a focus on active portfolio management.
The REIT's strategy of active portfolio management and the acquisition of properties with upside potential enables it to consistently deliver a healthy total return.
The divestment of our stake in ASK Chemicals is part of our continuous active portfolio management to reallocate capital towards our more profitable growth areas," added Hariolf Kottmann, CEO, Clariant.
Active portfolio management is key to achieve the target
The need for active portfolio management through regional or international acquisitions is taking a backseat for now, especially that there are ample credit opportunities at home.
The point to note is that fluid active portfolio management can add value, whilst being rigid and passive may lead to pedestrian returns.
The denominator, meanwhile, measures the amount of unsystematic risk the investors are exposed to because of the fund manager's active portfolio management efforts in pursuit of those excess returns (Reilly & Brown, 2009).
They also favour active portfolio management to achieve good results in the financial markets, and prefer to strategically time markets as opposed to adopting 'buy and hold' strategies.
To quantify active portfolio management, Cremers and Petajisto introduce a new measure they label "Active Share".
The regulatory agencies note that active portfolio management is especially important for financial institutions that project or have already experienced significant growth or concentrations in products with higher-risk factors like those listed above.