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The process of investment management can take various forms, with the more traditional type taking either an active or passive approach in an attempt to generating investment returns. The passive approach generally consists of the process of mirroring the conAdopting different management styles to generate investment returns
The process of investment management can take various forms, with the more traditional type taking either an active or passive approach in an attempt to generating investment returns. The passive approach generally consists of the process of mirroring the constituents of a reference benchmark with equal weightings and asset holdings. A typical example of passive investment strategies include Index funds and Exchange Traded Funds (ETFs). It comes as no surprise that most investors tend to have an inclination towards maximum yielding returns, and in fact, there exists a large number of funds which essentially take on active investment management strategies which essentially cater for such demands. Investment managers who are active in their day-to- day management styles, tend to seek to generate value added returns in excess to returns on a reference benchmark, a term better known as alpha. Key ratios that fund managers usually use in assessing the active value added risk in a portfolio include the information ratio and the Sharpe ratio. The information ratio is a means of assessing the mean active risk return per unit of active risk. Put simply, it measures the ability of a... Read more