Active Management
Definition
An investment strategy where a portfolio manager makes specific investments to outperform a benchmark index.
Explanation
Active management attempts to beat the market through stock selection, sector rotation, market timing, or factor tilts. The manager charges higher fees than passive alternatives in exchange for the promise of alpha. The SPIVA scorecard shows roughly 90% of active large-cap managers underperform the S&P 500 over 15-year periods, making consistent alpha generation rare and valuable.
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