From budgeting to diversified investments and inflation-protected products, discover how to position your retirement savings to mitigate the impact of rising costs.
What are the benefits of active management?
August 10, 2026
Discover five ways active management can add value, uncover hidden opportunities and mitigate risk – especially when markets are volatile.
Active and passive management both have pluses and minuses that can vary depending on the market climate. So, what’s the difference between these two management styles? It’s mainly how involved the investment manager is in decision making when it comes to selecting securities such as stocks, bonds and other asset classes for the portfolios they manage.
Active management uses a hands-on approach where portfolio managers actively make investment decisions related to security selection, often with the goal to outperform the market or a specific benchmark. Active managers perform extensive research and analysis at the security level, as well as using their expertise and judgment to select investments they believe have the potential to grow and perform well over time.
Passive management involves constructing portfolios to replicate the performance and risk characteristics of a specific market, index or asset class rather than actively trying to do better than the market. Compared to their active counterparts, passive managers tend to make fewer investment decisions. Passive funds buy and hold the same investments in the same proportion as in the chosen benchmark with minimal costs.
Active management: Five ways it can add value
1. Finding alpha
Alpha is the excess return of a portfolio compared to a specific benchmark’s return (e.g., the S&P/TSX Composite Index). The goal of active managers is to beat the market and achieve alpha via the specific investments in the portfolio.
Active managers conduct in-depth research on individual companies or sectors, analyzing financial statements, market trends, economic indicators and more. They then use this information to make changes to portfolios, such as investing in a certain stock, bond or sector.
Active managers generally seek to outperform benchmarks over specific time periods, especially in specialized sectors (like technology for example) or regions, but also less-efficient markets, such as small-cap stocks, emerging markets or fixed income securities.
2. Mitigating risk
With active management, much of the success or failure to generate higher returns depends not only on the manager’s ability to identify the right investment opportunities, but also on their ability to mitigate risk. Proactively identifying, assessing and mitigating potential risks in a portfolio is also essential.
Active managers develop and use various risk-assessment tools and metrics to gauge overall risks such as equity market risk, interest rate risk, credit risk and liquidity risk. By doing this, they can make adjustments to portfolio holdings to limit losses during periods of market volatility by shifting towards more defensive assets.
What is market risk?
Market risk is the risk investors face as a result of broad movements in financial markets. A well-diversified portfolio may help reduce the risks with individual holdings, but even a well diversified portfolio can’t avoid risks that affect entire markets. For example, rising interest rates could widely affect markets and even a well-diversified portfolio. Other market risks include changes to currency exchange rates and geopolitical events.
3. Flexibility
Unlike passive managers, active managers have the flexibility to adjust their portfolios in real time as market conditions change. This allows them to adjust portfolios during periods of market volatility to reduce risk or capitalize on opportunities in up markets.
For managed solutions, active management can greatly help with tactical asset allocation. This involves temporarily adjusting portfolio allocations to capture short-term opportunities and manage portfolio risk based on what’s happening in the markets.
4. Deep expertise
Active management relies on the insights of professional portfolio managers and research teams. It takes a whole team of professional investment managers and researchers to constantly monitor various indicators, sector performance and overall market trends to make proper adjustments to the asset mix.
Active managers use in-depth research to identify opportunities and capitalize on them, while passive management generally replicate the holdings and performance of an index by buying the same basket of securities as that index. The holdings in passive portfolios usually don’t change as much compared to actively managed portfolios.
5. Uncovering hidden opportunities
The goal of passive management is to mirror the returns of a benchmark as closely as possible, while keeping costs low. Its low cost drives many investors to make passive a substantial part of their portfolios.
However, in certain markets active managers can have the edge. For example, when markets are volatile and behaving irrationally, performance across stocks, bonds and sectors will likely vary more compared to when the investment landscape is calmer.
Active managers have more flexibility to adjust their portfolios to minimize downside risk. Compare that to passive managers who follow a benchmark’s composition, and don’t have the flexibility to adapt to changing market conditions.
Active management in action at Sun Life Global Investments
The Sun Life Global Investments Multi-Asset Solutions Team uses a strategic combination of active and passive strategies in its open-architecture approach.
Within Sun Life Granite Managed Solutions, tactical asset allocation is a key active management tool. It allows the team to make short-term adjustments when market events shift the risk/reward outlook for certain asset classes relative to longer-term expectations. In these situations, the team may temporarily adjust portfolio allocations to help manage risk and capitalize on potential opportunities.
At the same time, active management can be complemented by passive exposures. Solutions such as the Sun Life ETF+ Portfolios offer a hybrid approach. They combine the strength of core mutual funds with low-cost passive ETFs that track major indices, “plus” exposure to private fixed income, gold and a unique U.S. sector rotation strategy.1 This blend of active and passive elements provides diversification beyond traditional asset classes, cost efficiency and simplicity.
Ultimately, the choice between active and passive investing depends on an investor’s goals, risk tolerance, time horizon and personal preferences. Many investors may prefer a blended approach, combining the flexibility and opportunities provided by active management with the diversification and cost efficiency of passive investing.
To find out more about what’s right for you, talk to your advisor about the benefits and pitfalls of both approaches. An advisor can help you define your investment goals, risk tolerance and preferences.
1 Indirect exposure to gold is achieved by investing in underlying ETFs that seek to replicate the performance of the price of gold bullion.
Effective December 8, 2025, the Sun Life Tactical ETF Portfolios were renamed the Sun Life ETF+ Portfolios, they adopted changes to their investment strategies to include exposure to physical commodities, and their management fees were reduced for mutual fund accounts.
Information contained in this article is provided for information purposes only and is not intended to provide specific financial, tax, insurance, investment, legal or accounting advice and should not be relied upon in that regard and does not constitute a specific offer to buy and/or sell securities. Views expressed regarding a particular company, security, industry, or market sector should not be considered an indication of trading intent of any mutual funds managed by SLGI Asset Management Inc. These views are subject to change and are not to be considered as investment advice nor should they be considered a recommendation to buy or sell. Please note, any future or forward-looking statements contained in this document are speculative in nature and cannot be relied upon. There is no guarantee that these events will occur or in the manner speculated. Information contained in this article has been compiled from sources believed to be reliable, but no representation or warranty, express or implied, is made with respect to its timeliness or accuracy.
