Active Investment Management is the use of a human element, such as a single manager, comanagers or a team of managers, to actively manage a fund's portfolio. Active managers rely on analytical research, forecasts, and their own judgment and experience in making investment decisions on what securities to buy, hold and sell.
Investors who believe in active management do not follow the efficient market hypothesis. They believe it is possible to profit from the stock market through any number of strategies that aim to identify mis-priced securities.
Investment companies and fund sponsors believe it's possible to outperform the market, and employ professional investment managers to manage one or more of the company's mutual funds. The objective with active management is to produce better returns than those of passively managed index funds. For example, a large cap stock fund manager would look to beat the performance of the Standard & Poor's 500 Index.
For our active investment mandates we are proud to be associated with firms like Edgepoint Wealth. Watch this video
to learn more about Edgepoint and what makes them different
Active management involves higher costs and as a result, there must either be a risk or return advantage expected. Not many active managers can outperform an index over longer periods of time but there are several attributes that outperforming manager’s share. These are:
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- M. Cremers & A. Petajisto, “How Active is Your Fund Manager?” Yale School of Management, 2006.