closet indexing

Describes an actively managed fund with a portfolio that closely tracks its benchmark, thereby resembling an index fund. How active a fund is can be measured by its active share, which compares the weight of a stock within a portfolio to its weight within a benchmark index. The lower the level of active share, the closer the portfolio is to the index. R-squared can also be used to analyze how actively managed a fund is: A higher number indicates that a fund's movement aligns more with movements in the S&P 500 index and is less affected by active management decisions.