Passively managed

Passive Management

The practice of a money manager or a team of money managers making investment decisions on what securities to include in a fund or portfolio, and then leaving those securities largely unchanged for a significant period of time. To give a very simple example, an investment manager may buy every stock on the Dow Jones Industrial Average and hold them for a period of five or 10 years. Passive investment managers seek a well diversified set of securities. See also: Indexing, Active investing, Value investing.

Passively managed.

An index mutual fund or exchange traded fund is described as passively managed because the securities in its portfolio change only when the make-up of the index it tracks is changed.

For example, a mutual fund that tracks the Standard & Poor's 500 Index buys and sells only when the S&P index committee announces which companies have been added to and dropped from the index.

In contrast, when mutual funds are actively managed, their managers select investments with an eye to enabling the fund to achieve its investment objective and outperform its benchmark index. Their portfolios tend to change more frequently as a result. They also tend to have higher fees.

The performance of passively managed indexed investments and their risk profiles tend to correspond closely to the asset class or subclass that the index tracks. They tend to be more popular in bull markets when their returns reflect the market strength and less popular in bear markets when active managers may provide stronger returns.

References in periodicals archive ?
Smart beta products have emerged in concert with the growing orientation to passively managed solutions and the interest in creating a better "mousetrap" as far as risk and reward.
The volume of actively and passively managed mutual funds edged up in November of 2013, according to a new report.
Actively managed US-stock funds accounted for all of June's outflows, while passively managed offerings saw inflows of nearly $1.
For example, Barr wrote, "the Department's discussion regarding the relative risks of active and passive management and its focus on costs could lead plan sponsors to overweight passively managed funds in 401k plan menus.
HILO, a passively managed ETF composed of low volatility stocks, is designed to provide high dividend income but have lower volatility than the MSCI Emerging Markets Index.
8% in 2015, while passively managed assets fell by 5.
Investment managers could do more to get a handle on environmental, social and governance (ESG) risks within passively managed equity strategies, according to analysis done through Mercer's new rating process for passive investment strategies (ESGp).
One indicator of the market's expansion is the rollout of passively managed ETFs, an outgrowth of rising investor demand for alternative vehicles that can help optimize the risk-adjusted performance of portfolios.
The new Passive Focus List has an emphasis on index-based, passively managed investment options with a lower expense ratio.
Underlying these outflows is the growing preference by investors for passively managed funds and ETFs over actively managed mutual funds, which is the bread and butter of Janus and Henderson.
European passively managed funds under management during the same period rose to #x20AC;621 billion ($844.
Mutual's GlidePath funds are characterized by a multi-manager approach, using a combination of actively and passively managed investments, while Vanguard Target Retirement Funds are comprised of Vanguard's passively managed index funds.