If a fund aims to outperform a stock market index, which investment management style is it adopting?

• A. Open-ended.
• B. Passive.
• C. Active.
• D. Closed.

Answer: (C)

A fund that aims to outperform a stock market index is using active management. In active management, the manager makes intentional security selections and sometimes timing decisions with the goal of delivering returns above the chosen benchmark.

Passive management, by contrast, seeks to mirror the index's returns rather than beat them. Open-ended and closed-end describe fund structures (how investors buy/sell and how shares are issued or traded) and can house either active or passive strategies, so they don’t define the management style.