Page 4 - PRIAA Glossary

ACTIVE INVESTMENT MANAGEMENT
The process of trying to generate above-benchmark returns. Portfolios managed by asset managers are generally assigned a benchmark appropriate for the mandate of
the assets held. The portfolio manager can then make investment decisions that either keep the portfolio in line with benchmark holdings and exposure or take on positions or trades that deviate from the benchmark weights. This deviation away from the benchmark is known as active investment management i.e., when the portfolio manager makes active bets in an attempt to generate above- benchmark returns.
ACTIVE RISK
Risk that a fund or managed portfolio creates as it attempts to beat the returns of the benchmark against which it is compared. The more an active portfolio manager diverges from a stated benchmark, the higher the chances become that the returns of the fund could diverge from that benchmark as well.
ACTIVELY MANAGED
A method of portfolio or fund management in which a manager attempts to generate returns above a specific benchmark, such as an index or rate, by selectively picking stocks or using other investment methods such as arbitrage or short selling.
ACTIVELY MANAGED ETF
Unlike a passive ETF which is meant to simply track an index, the manager or management team of an actively managed ETF picks particular stocks, takes on more risk and does
not necessarily follow one index. This allows opportunities for returns greater than with a passively managed ETF. Due to more manager involvement, the expense ratio on actively managed ETFs tends to be higher.
AFFIRMATION
The process by which two counterparties verify that
they agree upon the primary economics of a trade. The affirmation process may be done by telephone, voice recording, email or via an electronic verification platform.
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