Active return
Principles of Finance glossary · Risk, Return & Portfolio Theory
Definition
The return of a portfolio minus the return of its benchmark.
Active return in plain English
When you invest, you want to know if your choices actually beat just doing the easy, default thing. A "benchmark" is that default yardstick — often a broad market index like the S&P 500 that you could have matched cheaply without any special skill. "Active return" is simply how much you beat (or trailed) that yardstick: your return minus the benchmark's return. If your portfolio gained 12% and the benchmark gained 10%, your active return is +2%, the part you can credit to your own decisions rather than the market just rising.
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