Definition of active management

When the manager of a fund or portfolio makes proactive trading decisions in order to maximize returns. The opposite is passive management, when a fund or portfolio is tied to an index or basket of securities and the manager's role is limited. [1]

Active managers believe they can outperform the market by identifying mispricing through a variety of strategies. For example, they might see a trend whereby companies with high cashflows are being underpriced by the market, so they buy them and wait for that value to be realised. [2]