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Active return definition

A term that is easy to calculate, but often mistakenly called alpha--its risk-adjusted counterpart.

Intermediate

Active return is the positive or negative result of a portfolio return minus its benchmark return over a specified period of time. For example, if a fund's total return was 9% and the benchmark return was 8%, then the active return for that period was +1%. Unlike the term alpha, active return does not take risk into consideration.

Synonym: relative return


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Quiz

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Active return is a risk-adjusted return measure. | True or False?

False

In a Sentence

Kay:  Shoot me now. Ken says we need training on the difference between active return  and alpha.
Ann:  Gladly. And, what's wrong with that?

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Keywords:
active return
portfolio return
benchmark return
relative return
alpha
active management
return
investment
fund
comparison