Passive management

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Passive management , also known as passive portfolio management or passive investment style , is a form of strategy in portfolio management , i.e. the management of assets invested in securities.

Indicator of the passive management is very low management costs a - by a rule stock index predetermined - benchmark (English benchmark ) replicate more or less perfect. In this context, reallocations of assets are only rarely necessary (for example when the index composition is adjusted).

The counterpart to passive management is active management , in which the attempt is made to achieve an excess return compared to the benchmark by reallocating significantly higher management costs. However, studies show that on average less than 20 percent of all actively managed funds achieved the excess return after costs. In some cases, intermediate forms are also considered, for example semi-passive management , which can include, for example, the investment style of the investment machines (“Robo-Advisor”).

Special case funds

If the fixed assets are a fund , one also speaks of passive fund management . Most passively managed funds are so-called index funds - they map an index and therefore hardly require any management intervention, so the running costs are low. With the help of barter transactions ( swaps ) not only equity indices, but also for example to raw materials are displayed in an index fund.

Comparison to active management

If you compare passive and active portfolio management, the following advantages and disadvantages can be cited from the perspective of passive management:

advantages

  • Low expense ratio
  • Value development can be assessed using the performance of the benchmark (usually a stock market index )

disadvantage

  • Missed opportunity to achieve an excess return through good active management
  • Smaller range of selectable risk-return profiles

Individual evidence

  1. ↑ Thomas Benesch, Franz Ivancsich: Active versus Passive Portfolio Management. What is written in glass balls about efficient markets . In: Working Paper Series by the University of Applied Sciences of bfi Vienna . No. June 16 , 2005 ( Online [PDF; 406 kB ]). Here p. 4.
  2. ↑ Thomas Benesch, Franz Ivancsich: Active versus Passive Portfolio Management. What is written in glass balls about efficient markets . In: Working Paper Series by the University of Applied Sciences of bfi Vienna . No. June 16 , 2005 ( Online [PDF; 406 kB ]). Here p. 8.
  3. ↑ a b Investment Funds: Active or Passive Management - Which Is More Successful? In: Insurance messenger. Retrieved February 4, 2018 .
  4. ↑ Active management versus passive management. (PDF; 99 kB) Sauren Fonds-Service AG, accessed on February 4, 2018 .