Most ETFs track an index, such as the S&P 500® Index. These types of investments are considered "passively managed." Any purchases or sales of securities by the fund are made to keep the portfolio in line with the index it attempts to track.
"Smart beta" ETFs are a growing category of ETFs that are passively managed; however, they seek to either improve their return profile or change their risk profile, relative to a market benchmark. This is to say that smart beta ETFs are passively managed in that they attempt to replicate the exposures of a benchmark, but that the composition of the benchmark may not necessarily look like that of any market index, as it has been engineered to represent a targeted factor exposure. This is accomplished by tilting one or more factors of the corresponding benchmark, such as increasing or decreasing exposure to growth or value characteristics relative to a market index.
There are some ETFs that, by design, do not strictly track an index. Instead, they are actively managed with the goal being to outperform a benchmark like the S&P 500. The fund manager for an actively managed ETF may choose to hold different securities, and/or in different weights versus those of the index that the ETF seeks to outperform.
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