What is active asset management

Active asset management in finance refers to the practice of actively buying and selling assets within a portfolio in an effort to outperform a specific benchmark or market index. This approach involves making investment decisions based on extensive research, analysis, and market predictions, rather than simply holding onto assets in a passive manner. Active asset management typically involves a higher level of involvement and decision-making from fund managers or financial professionals. These individuals closely monitor market trends, economic indicators, and company performance in order to identify opportunities for buying or selling assets for the portfolio. The goal of active asset management is to generate higher returns than the overall market, and to potentially mitigate risk through strategic decision-making. This may involve making tactical allocation decisions, adjusting the portfolio's exposure to different asset classes, or actively seeking out undervalued or high-growth opportunities. While active asset management can potentially lead to higher returns, it also carries higher costs and risks. The increased trading activity and research involved can result in higher fees and expenses, and there is also the risk of the portfolio underperforming the market or benchmark. Overall, active asset management requires a more hands-on approach to investing, and is often associated with a more dynamic and opportunistic investment strategy. It is a common practice in the world of institutional investing, mutual funds, and hedge funds, where professional money managers actively make investment decisions on behalf of their clients.