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Active investing meaning
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What does Active investing mean?
Active investing (active portfolio management) describes a discretionary strategy where an investment manager makes frequent buy/sell decisions to try to outperform a benchmark. In practice it appears in fund prospectuses and investment management agreements (IMAs) to distinguish the strategy from passive index-tracking and to frame fees, risks and disclosure.
The term is descriptive rather than defined in legislation or case law, but it has regulatory and tax significance. Providing active discretionary management requires authorisation and compliance with MiFID II conduct rules (FCA in the UK; Central Bank of Ireland), including suitability, best execution and conflicts management.
For tax, investors and advisers should ensure the activity is treated as investment rather than trading, as HMRC and Irish Revenue assess status case by case (including the “badges of trade”/“adventure in the nature of trade”). Trading treatment may result in profits being charged to income tax rather than capital gains tax (CGT). High portfolio turnover typically increases dealing costs and may increase stamp duties (e.g., UK SDRT, Irish stamp duty) and management/performance fees.
Usage and legal effect are broadly consistent across England & Wales, Scotland, Northern Ireland and Ireland, subject to regulator- and tax‑authority differences.
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View the related News about Active investing
NEWS
April 2025 EU and Irish investment firms regulatory update: CBI investor money guidance; ESMA MiFIR/MiFID II/MAR/EMIR 3/Green Bond work; EC capital markets integration consultation
Domestic CBI Guidance on Investor Money Requirements On 8 April 2025, the Central Bank of Ireland (CBI) issued an updated edition of the Guidance on Investor Money Requirements. The update refreshes the 2023 guidance and integrates the Investor Money Requirements questions and answers. It is designed to aid the sector in interpreting and complying with the Investor Money Requirements set out in Part 7 of the Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) (Investment Firms) Regulations 2023 (S.I. No.10 of 2023). European ESMA 2025 Research Conference—call for papers On 2 April 2025, the European Securities and Markets Authority (ESMA) announced a call for papers ahead of its 2025 Research Conference, ‘Understanding investment funds: Developments and risks in the EU fund industry’. ESMA invites submissions from researchers, policymakers and industry experts on competitiveness, retail investing, active/passive/ETF, ESG, artificial intelligence and innovative technologies, leverage and stress testing. Send submissions to risk.analysis@esma.europa.eu by 12 June 2025. The conference will be held on 25 November 2025, with notifications to...
30 May
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View the related Practice Notes about Active investing
PRACTICE NOTES
Commercial real estate finance: flexible senior (accordion/hunting), stretched senior, mezzanine and preferred equity structures, with intercreditor dynamics and lender controls
Flexible loan structures In the wake of the financial crisis, mainstream bank lending pulled back, creating space for non-bank lenders (NBLs) such as insurers and real estate debt funds. Through 2012 and 2013, this gap allowed NBLs to consolidate their position and become established market participants. With confidence returning to the real estate investment market and banks re-entering from 2014, some NBLs, especially real estate debt funds, shifted up the risk spectrum away from the senior debt arena. This has produced a competitive environment for real estate debt across the capital stack. Banks, insurers and debt funds adopt different approaches, each targeting an optimum deal size, asset class and loan purpose. Four often-used flexible loan structures are: flexible senior loans stretched senior loans mezzanine loans preferred equity loans Flexible senior loans Banks are particularly active in this space alongside some insurers, although senior facilities have typically been provided at conservative loan-to-value, loan-to-gross development value and loan-to-cost ratios. Real estate...
21 May
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