8.13What is an actively managed fund?
1What is it?
An active fund has a manager who chooses stocks, trying to beat a benchmark index.
2Why does it exist?
Skilled managers may add returns ("alpha"), but they charge higher fees, and many fail to beat the index consistently.
3Quick revision
- Manager picks stocks.
- Aims to beat benchmark.
- Higher fees; results vary.
4Knowledge check
Q1. What is alpha?Show answer
Return above the benchmark.
Q2. Do active funds always beat the index?Show answer
No.
Q3. Why are their fees higher?Show answer
They pay for research and active management.