A passive management style involves simply following or tracking the wider market. These funds tend to be lower cost because the fund managers need to make fewer decisions.

An active management style involves more decisions being made by fund managers as to what to invest in, and when. Active management can deliver greater returns but this is not always the case. There can also be more variability in returns. Active funds tend to be more expensive than passive funds.

Sometimes investment managers use a blend of the two styles by having the core of the portfolio in passive investments, with a smaller proportion being actively managed.