What is an Actively Managed Fund?
An actively managed fund is a mutual fund or exchange-traded fund (ETF) in which the investment manager makes ongoing decisions on whether and when to buy and sell securities based on expectations for how those securities will perform. The fund manager generally seeks to outperform a designated benchmark or manage the portfolio in a way that takes a different approach to risk, income or other related factors.
Example of an actively manage fund: An actively managed fund typically seeks to outperform a designated benchmark that aligns with the fund’s investment mandate, such as the S&P 500® stock index or the Barclays Capital U.S. Aggregate Bond Index.
Difference between actively managed funds and passively managed funds: Actively managed funds are the opposite of passively managed funds, which seek to mirror the performance of a particular index by holding the same or similar securities represented by the index, in similar proportions, regardless of how that benchmark is expected to perform. Passively managed funds are generally referred to as index funds.