Business Glossary
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-
investment management
where the
portfolio manager
actively makes investment decisions and initiates buying and selling of securities in an effort to maximize
return
. It is the opposite of passive management, where the money manager oversees a fixed portfolio structured to match the performance of the overall market or a preselected part of it, a strategy called
indexing
.
The terms active and passive management apply at the level of portfolio management; the operative concept is management, implying professional management. passive investing is something else. An individual who buys an index fund is engaging in passive investing as is an investor in a limited partnership deemed passive by the Internal Revenue Service. But should the same individual hire an investment counsel , who chose to place his or her client's funds in passive investments, the investment counsel would be making investment choices and thus be engaged in active management. The passive investments themselves might or might not be under active management; an index fund would be under passive management, while the passive limited partnership, having business activities, would be under active management.
- bond terminology meaning a strategy of buying and selling rather than holding to maturity.
