// definition
Passive investing
Tracking a benchmark index
Short definition
An investment strategy that aims to track a benchmark’s performance under its rules. Depending on the mandate, replication can use all constituents, a sample of securities or a synthetic approach. Investor flows and index changes can require trading. Fees and execution conditions can cause performance to differ from the benchmark.
risk atlas
Knowledge map
Intuition
Index rules guide portfolio adjustments.
Related analyses
Primary sources
- Sushko and Turner, BIS, March 2018Definition of passive investing and trading caused by flows or composition changes.
- ESMA, Guidelines on ETFs and other UCITS issues, 2014Definitions and paragraph 9: full or sampled physical replication, synthetic replication and tracking factors.