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The Case For Enhanced Active Strategies

Enhanced Active strategies can allow investors to receive higher returns, but with lower tracking error versus the benchmark. By incorporating data-driven fundamental signals and top-down views, Enhanced Active can provide small incremental improvements over the benchmark – without deviating sharpy from the benchmark risk profile.

June 5, 2025

Kishore L Karunakaran

Managing Director

What follows is an excerpt of the white paper. Download the full piece here.

Over the past several decades, passive investments have become the default core holding for most long-term investors—particularly those investing in scale. Cost efficiency, liquidity and simplicity are just a few of the reasons why. And while these benefits do hold merit, there are other tangential approaches—such as Enhanced strategies—that may give investors additional return and are worth considering.

Traditional binary definitions of ‘Active’ and ‘Passive’ no longer reflect the reality of today. Client needs and preferences are increasingly more complex as a result of the ever changing global landscape. This warrants a greater variety of solutions and approaches along the spectrum.

Learn How Enhanced Active Portfolios Work

Enhanced active strategies—also known as low tracking error active, or enhanced indexing strategies—are often overlooked or misunderstood. They are not diluted active management strategies, or passive strategies with a twist. They are purpose-built systems designed to deliver modest, persistent outperformance through disciplined, risk-aware decision-making.

Download the Full White Paper

An Enhanced strategy can offer a compelling alternative for investors seeking incremental returns above the benchmark, whilst taking on a tracking error that is 0.5%-2% lower than that of a traditional active strategy. This approach preserves the foundational benefits of passive investing while leveraging the strengths of systematic active methods, where each unit of risk must be efficiently rewarded.

The elegance of an Enhanced approach is that it’s not a compromise between active and passive—it is a deliberate investment philosophy and approach: active in insight, modest in risk, and designed to deliver more from the core of your equity allocation.

Disclosure

ssga.com

Marketing Communication

State Street Global Advisors Worldwide Entities

The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without State Street Global Advisors’ express written consent.

The views expressed in this material are the views of Kishore Karunakaran through May 20, 2025 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.

The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor.

All information is from State Street Global Advisors unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.

Past performance is not a reliable indicator of future performance.

Investing involves risk including the risk of loss of principal.

Equity securities may fluctuate in value in response to the activities of individual companies and general market and economic conditions.

The trademarks and service marks referenced herein are the property of their respective owners. Third party data providers make no warranties or representations of any kind relating to the accuracy, completeness or timeliness of the data and have no liability for damages of any kind relating to the use of such data.

For EMEA Distribution: The information contained in this communication is not a research recommendation or ‘investment research’ and is classified as a ‘Marketing Communication’ in accordance with the Markets in Financial Instruments Directive (2014/65/EU) or applicable Swiss regulation. This means that this marketing communication (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research (b) is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This communication is directed at professional clients (this includes eligible counterparties as defined by the appropriate EU regulator) who are deemed both knowledgeable and experienced in matters relating to investments. The products and services to which this communication relates are only available to such persons and persons of any other description (including retail clients) should not rely on this communication.

Companies with large market capitalizations go in and out of favor based on market and economic conditions. Larger companies tend to be less volatile than companies with smaller market capitalizations. In exchange for this potentially lower risk, the value of the security may not rise as much as companies with smaller market capitalizations.

The market values of growth stocks may be more volatile than other types of investments. The prices of growth stocks tend to reflect future expectations, and when those expectations change or are not met, share prices generally fall. The returns on “growth” securities may or may not move in tandem with the returns on other styles of investing or the overall stock market.
Investments in mid-sized companies may involve greater risks than those of larger, better-known companies, but may be less volatile than investment in smaller companies.

Actively managed funds do not seek to replicate the performance of a specified index.

The Strategy is actively managed and may underperform its benchmarks. An investment in the strategy is not appropriate for all investors and is not intended to be a complete investment program. Investing in the strategy involves risks, including the risk that investors may receive little or no return on the investment or that investors may lose part or even all of the investment.

This document provides summary information regarding the Strategy. This document should be read in conjunction with the Strategy's Disclosure Document, which is available from SSGA. The Strategy Disclosure Document contains important information about the Strategy, including a description of a number of risks.

Diversification does not ensure a profit or guarantee against loss.

8033721.1.1.GBL.INST 0525

Exp. Date: 05/31/2026

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