Chartered Investment Manager (CIM) Practice Exam · Question
Which of the following best defines 'active management' in portfolio strategy?
Active management involves a portfolio manager making specific investment decisions (e.g., security selection, asset timing) with the goal of generating returns
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Question: Which of the following best defines 'active management' in portfolio strategy?
Answer options:
- A strategy that aims to replicate the returns of a specific market index.
- An approach that involves frequent trading to generate short-term profits. ✅ A strategy where the portfolio manager makes specific investment decisions to outperform a benchmark.
- A method focused on minimizing management fees through passive investing.
Correct answer: A strategy where the portfolio manager makes specific investment decisions to outperform a benchmark.
Explanation: Active management involves a portfolio manager making specific investment decisions (e.g., security selection, asset timing) with the goal of generating returns that exceed a specific benchmark or market index, after accounting for fees.
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