Why Choose Active Management?

Why Choose Active Management?

Within the realm of investment techniques, two primary approaches dominate the landscape: active management and passive management. What's the difference?

What is Active Management?

Active management is an investment approach with the intention of outperforming the market by actively buying and selling securities based on a fund manager’s research, analysis, and judgment.

Key characteristics of active management:

  • Fund Manager Expertise: The success of active management hinges on the knowledge, experience, and judgment of fund managers. These professionals utilize their skills to make strategic asset allocation decisions, select individual securities, and actively manage risk.
  • Research and Analysis: Active managers dedicate substantial resources to researching and analyzing various investment opportunities. They aim to identify undervalued securities, market trends, and factors that may impact returns.
  • Higher Portfolio Turnover: Active managers may frequently buy and sell securities within their portfolios based on their analysis and market expectations. While this approach allows them to exploit market fluctuations and potentially generate higher returns, it may lead to higher portfolio turnover and transaction costs.
  • Higher Fees: Due to the research, analysis, and trading involved, actively managed funds generally have higher expense ratios and fees compared to passive funds.


What is Passive Management?

Passive management, also known as index investing, involves constructing a portfolio that closely mimics the performance of a specific market index.

Key characteristics of passive management:

  • Index Replication: Passive managers seek to replicate the holdings and performance of a particular market index, such as the S&P 500. This is achieved through investing in index funds or exchange-traded funds (ETFs), which closely track the index composition.
  • Lower Portfolio Turnover: As the primary objective is to track an index rather than actively make investment decisions, passive management involves minimal trading activity. Consequently, portfolio turnover remains low, reducing transaction costs and potential tax liabilities.
  • Lower Fees: Passive funds typically have lower expense ratios and fees than actively managed funds because they require less research, analysis, and trading activity.
  • Market Performance: Rather than aiming to outperform the market, passive management seeks to capture the overall market returns. Investors using passive strategies recognize the efficiency of markets and their inability to consistently beat them over the long term.


Consider active management as the equivalent of Uber, enabling managers to make timely, informed decisions in response to conditions and opportunities, while passive management, like a bus following a set route, tracks a market index with a steadier approach.


Potential for Outperformance

  • For active managers, the goal is to outperform the market by actively selecting securities they believe will generate above-average returns. Skilled managers with strong research capabilities may be able to identify undervalued or overlooked opportunities, potentially leading to superior investment performance.

Risk Management

  • By adjusting the portfolio composition, active managers can manage risk. They have the ability to implement risk mitigation strategies, such as diversification, hedging, or reducing exposure to specific sectors or securities that they believe may underperform.

Flexibility & Adaptability

  • Active managers have the flexibility to adjust their portfolios and asset allocations based on changing market conditions and economic trends. They can react to market opportunities and make timely investment decisions to capitalize on emerging trends.

Unique Investment Strategies

  • Active management allows for the implementation of specialized investment strategies, such as sector rotation, long-short strategies, or concentrated portfolios. These strategies can provide opportunities for generating alpha, especially in specific market conditions or niche sectors

Manager Skill & Expertise

  • Active management relies on the expertise and experience of fund managers who have in-depth knowledge of the markets, industries, and individual securities. Skilled managers may have the ability to identify mispriced assets, uncover investment opportunities, and navigate challenging market environments.


It is important to note that the choice between active and passive management depends on various factors such as an individual’s investment goals, risk tolerance, time horizon, and personal preferences. Both strategies have their advantages and disadvantages, and investors may prefer one over the other based on specific circumstances.


What’s next? Learn more about Cambiar’s actively managed Aggressive Value ETF here.





Mutual fund investing involves risk, including the possible loss of principal. In addition to the normal risks associated with investing, investments in smaller companies typically exhibit higher volatility. There can be no assurance that the Fund will achieve its stated objectives. Diversification does not ensure a profit or guarantee against a loss. The Cambiar Aggressive Value ETF is a non-diversified fund. The Fund pursues a “value style” of investing. Value investing focuses on companies whose stock appears undervalued in light of factors such as the company’s earnings, book value, revenues or cash flow. If the Adviser’s assessment of market conditions, or a company’s value or prospects for meeting or exceeding earnings expectations is inaccurate, the Fund could suffer losses or produce poor performance relative to other funds or market benchmarks. The Fund may trade securities actively, which could increase its transaction costs (thereby lowering its performance) and could increase the amount of taxes you owe by generating short-term gains, which may be taxed at a higher rate. There is no guarantee that the Fund will meet its stated objectives.

To determine if a Fund is an appropriate investment for you, carefully consider the Fund’s investment objectives, risk factors and charges and expenses before investing. This and other information can be found in the Fund’s summary or statutory prospectus which can be obtained by clicking here or calling 1-866-777-8227. Please read it carefully before investing.

Cambiar Funds are distributed by SEI Investments Distribution Co., 1 Freedom Valley Dr. Oaks, PA 19456, which is not affiliated with the Advisor. Cambiar Funds are available to US investors only. Strategies included within the Separate Account section are not mutual funds and are not affiliated with SEI Investments Distribution Co.

For characteristics and risk definitions, please click here.