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Active Passive Combination
Definition
This is a portfolio management strategy that allocates the core of the portfolio to a passive strategy (like an index fund) and the balance to an active strategy.
Using the term Active Passive Combination :
There is reasonable academic support for a strategy of this type as the core part of a portfolio such as the S&P500 index is very difficult to outperform so it is better to track the index and keep costs low. In other segments such as emerging markets and small cap stocks, some would argue that there are certain active managers that can outperform the index due to informational inefficiencies. Therefore, paying for active management in this segment of the portfolio is reasonable. Come call this a core-satellite approach as well.
Pay Special Attention To :
There are not too explicit risks to highlight in this strategy. It is more a matter of taste and how you choose to pay for services, i.e. indexing the core saves you money but also limits your chances of outperforming.
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Related terms
Active Management , Active Return
