What is the difference between active and passive management?

Active management tries to beat the indices through dynamic portfolio management, seeking to generate alpha, or in other words, it seeks to beat its reference index. To do this, it is the manager who decides what he/she wants the composition of the portfolio to be, within, of course, the investment policy of the fund. In this way, the management team analyses changes in market trends, in the economy, in the political landscape and also how companies and sectors evolve in order to adopt the most appropriate strategy at all times.

For its part, in passive management there is no manager with freedom of action, but is limited to predetermined rules; the most common thing is to try to replicate the evolution of an index.

An example could be the ETFs linked to the Ibex or the Eurostoxx, in this case what is sought is not to generate alpha, but rather its objective is to replicate the behaviour of the market.