Integrating active and passive management - To produce superior investmentresults.

Many investors think of active and passive management as mutually exclusive approaches in investment management; they are proponents of either active or passive management. In the view of the authors, it is more useful to thi nk of these investment management approaches as lying along a continuum, wi th passive management using index replication at one end of the continuum, and active management using aggressively concentrated portfolios at the oth er end. Both investment management approaches have benefits and shortcoming s. By combining active and passive approaches to investment management, pla n sponsors, foundations, and endowments can maximize the benefit potential and may minimize the shortcoming; of each to improve overall portfolio resu lts. The authors compare the two approaches, discuss their historical perfo rmance, and present a framework for combining the two on a strategic (long- run), tactical (medium-run), and dynamic (short-run) basis.