MacroVar is a financial and economic data analysis platform designed by institutional investors to help you discover trading opportunities and investment strategies based on your risk / return profile across all major financial markets.

MacroVar is designed for both Active and Passive Portfolio Management. Learn more about their differences below and select what suits your profile.

Active vs. Passive Portfolio Management

Professional trading involves a more hands-on approach to investing, with portfolio managers actively selecting securities and making decisions based on market research and analysis.

Portfolio management, on the other hand, is a more passive approach that involves tracking a benchmark index with a portfolio of securities that mirrors the composition of the index.

Active portfolio management refers to a management style that involves frequent buying and selling of securities to generate returns above the benchmark index (generate alpha). Active portfolio managers aim to outperform the market by identifying mispricing, inefficiencies, and opportunities that the market has overlooked. To achieve this objective, active managers use a variety of tools, including quantitative analysis and fundamental analysis. One of the key advantages of active management is the potential for higher returns than passive management. According to a study, active managers can generate significant alpha (returns above the benchmark index) in certain market conditions, particularly during periods of market turbulence. Additionally, active management allows for greater flexibility in portfolio construction and risk management than passive management. However, active management also has its drawbacks. One of the main disadvantages is the higher costs and fees associated with active management. Active managers typically charge higher fees than passive managers due to the additional research and analysis required to identify mispricings and inefficiencies. These costs can significantly erode returns over time, particularly if the manager is unable to consistently generate alpha. Here we favour systematic approaches to active management, with the goal of reducing poor decision making.

Passive portfolio management, also known as index investing, involves tracking a benchmark index with a portfolio of securities that mirrors the composition of the index. The portfolio is rebalanced periodically to maintain the target mix of assets. Passive managers aim to replicate the performance of the index, rather than outperform it, by holding a diversified mix of assets that reflect the composition of the index. One of the main advantages of passive management is lower costs and fees. Passive managers do not need to conduct extensive research and analysis, which reduces costs and fees compared to active managers. Additionally, passive investing has been shown to provide higher risk-adjusted returns than active investing in some cases. According to a study by Vanguard, passive investing has outperformed active management in the long term due to lower costs and more efficient market exposure. However, passive management also has its negatives. One potential disadvantage is concentration risk in the benchmark index. For example, an investor in a passive portfolio that tracks the S&P 500 would be heavily exposed to the US equity market and may miss out on opportunities in other regions or asset classes. Additionally, passive portfolios may not be able to take advantage of market inefficiencies or mispricings.

Diversification is essential in multi-asset construction, regardless of the approach used. By spreading investments across different asset classes and geographic regions, diversification helps to reduce portfolio risk. Multi-asset portfolios can include equities, fixed income, currencies, real estate, commodities, and alternative investments. Some investors may prefer the simplicity and low costs of a passive approach, while others may seek the potential for higher returns and greater control over portfolio construction offered by an active approach.

Professional Trading

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Passive portfolio management

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