Passively Managed Funds: which statement is correct?

• A. Aim to provide returns in line with the market return.
• B. Aim to provide returns that outperform the market.
• C. Never make a loss.
• D. Aim to invest only in cash products.

Answer: (A)

Passive management centers on tracking a market index. The goal is to deliver returns that move with the market, after costs, rather than trying to beat it. By holding a broad slice of the index and keeping fees low, these funds aim to minimize the gap between fund performance and the index—so the returns are in line with the market. This contrasts with active management, where managers seek to outperform the market but typically incur higher fees and greater risk. Remember, markets can decline, so passive funds can lose value just like any market investment. They also don’t restrict themselves to cash; their holdings mirror the chosen index, such as a broad equity or bond index.