The Concept of Active Portfolio Management

The recipient of a Bachelor of Arts in economics from Skidmore College, Sean Kemery has also served prominent investment banks, including UBS and Deutsche Bank as a commodity, currency and equity correlation portfolio manager.

Effective portfolio management is a key part of every successful investment strategy at most hedge funds. While every investor has the primary goal of making a financial profit, the level of risk investors can embrace to achieve that aim varies. Depending on the goal of an investor and the amount of risk they are willing to take to attain that goal, portfolios can be managed in different ways. Active portfolio management is one of these approaches.

Active portfolio management aims to surpass market predictions by diversifying and combining assets in ways that the investor or portfolio manager feels would generate maximum profits. For this reason, this approach doesn’t rely on a standard buy-and-hold strategy or follow market benchmarks, but rather depends on the dexterity of the portfolio manager. The portfolio manager may buy, sell, or hold various investment vehicles based on indications from self-conducted investment analysis and personal experience, often leading them to shun current market predictions. Aside from working to outperform market benchmarks such as the S&P 500, active portfolio managers may also tune portfolios in ways that minimize tax consequences and lower risk.