Active portfolio management involves the selction of securities based on research. This is meaningfully distinct from Index Funds, which generally are designed based on rules and administered by third-party index providers.
A portfolio that employs active portfolio management strategies could outperform or underperform various benchmarks or other strategies. In an effort to meet or surpass these benchmarks, active portfolio management might require more frequent trading or “turnover.” This results in shorter holding periods, higher transactional costs and/or taxable events generally borne by the client, thereby potentially reducing or negating certain benefits of active asset management including returns achieved.
Ethical Capital's investment strategies are primarily active, though we may use index funds from time to time for tactical reasons or to fulfil client mandates. To learn more about why we manage portfolios this way, read this essay by Sloane Ortel, our Founder and Chief Investment Officer, about how she became an active manager.