Active Management
A fund management style in which a portfolio manager exercises discretion to select holdings, time entries and exits, and deviate from a benchmark in pursuit of excess return. The defining property is DISCRETION -- the manager is not bound by a published rule. Active funds typically charge 50-150 basis points and over 15-year windows underperform their passive benchmarks roughly 80-90% of the time net of fees, per multiple SPIVA scorecard editions. Active management can still earn its keep in less-efficient niches (small-cap value, distressed credit, frontier markets) where rule-based replication is weak.
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Related terms
Active Share · AI Revenue · Anchoring Bias · Cost of Capital · Creation Unit · Days to Cover
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