An actively managed fund buys and sells assets in an attempt to achieve certain criteria. For example, to outperform a specific index or benchmark, or meet the requirements of the client's appetite for risk.
An actively managed investment fund has an individual portfolio manager and team making investment decisions for the fund to try and add value. The success of the fund depends on in-depth research, market forecasting, and the expertise of the management team.
Passive fund management is also referred to as index fund management. The fund is designed to parallel the returns of a particular market index or benchmark as closely as possible.
The purpose of passive portfolio management is to generate a return that is the same as the chosen index.
A passive strategy does not have a management team making investment decisions and can be structured as an exchange-traded fund (ETF), a mutual fund, or a unit investment trust.