--%>
Assignment Help - homework help

Active versus Passive fund managers

Active vs. Passive fund managers:

Passive fund managers adopt a long term buy and hold strategy. Usually, stocks are purchased so that the portfolio’s returns will track those of an index over a period of time. Because of this goal of keeping a track on the index, this approach is also called indexing. The purpose of an indexed portfolio is not to beat the target index but to match its performance.

Active fund manager on the other hand attempts to outperform a passive benchmark portfolio on a risk adjusted basis. A benchmark portfolio is a passive portfolio whose average characteristics including factors like beta, dividend yield, industry weighting and firm size match the risk return objectives of the client. When deciding to whether to follow an active of a passive investment strategy, the investor must assess the trade-off between the low cost but less exciting alternative of indexing versus the higher cost but potentially more lucrative alternative of active management.

   Related Questions in Corporate Finance

  • Q : Investors are irrational or naive

    Explain how companies with substandard financial history can draw the attention of investors. Are investors irrational or naive?

    		•
  • Q : What is Box Spread Box Spread: This is

    Box Spread: This is another strategy which seeks to exploit the arbitrage opportunities which are available in the market. In case that the options are correctly priced, this strategy would earn only the risk free rate. However, due to existence of im

    		•
  • Q : Historical return on stock market and

    The market risk premium is difference among the historical return upon the stock market and the risk-free rate, for yearly. Why is this negative for some years?

    		•
  • Q : Shall we use the arithmetic mean or the

    The market risk premium is the difference between the historical return on the stock market and the return on bonds. But how many years does “historical” imply? Shall we use the arithmetic mean or the geometric one?

    		•
  • Q : Data Case Please assist with the

    Please assist with the attached Data Case assignment

    		•
  • Q : Explain few Spanish mutual funds

    Is this true that very little Spanish mutual funds outperform their benchmark? Isn’t this strange?

    		•
  • Q : Explain valuation method for

    We were assigned a valuation of a pharmaceutical laboratory’ shares. Which valuation method is further convenient?

    		•
  • Q : Bank assignment You have just been

    You have just been hired as the branch manager for a big bank in XYZ. You were told that the bank is going to open a new branch at Island Learning Centre of the Open University of XYZ. The management of the bank is much concerned that the new branch might not be able

    		•
  • Q : Problems under Time Value of Money One

    One of the projects the US loan would fund is to build earthquake-resistant buildings. The projectwill begin in March 2013, last for two years and is expected to have the following expenditures:start-up costs of $200,000 paid at the beginning of the first month; renta

    		•
  • Q : State Transition Management Transition

    Transition Management: It is a financial service accessible to institutional investors who require making significant modifications to their portfolios, like merging, selling, or substantially restructuring them. This procedure can expose investors to

    		•