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The key difference between active and passive Portfolio Management is the approach undertaken by the Portfolio Manager when taking investment decisions.
In the first case, stocks or bonds are bought with the goal to over-perform a specific market index (S&P 500 Index, JPM US Treasuries Bonds Index). As such, a deep analysis on market trends (factors, for example) and company-specific information needs to be done in order to select the stocks/bonds which will out-perform the selected index.
In the second case, the approach undertaken by the Portfolio Manager (and so the selection of stocks/bonds) aims to replicate the performance of a benchmark. As such, a deep analysis of the benchmark composition (in terms of countries and weight of every single security) has to be performed so that the Portfolio performance will replicate the one of the benchmark.
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