While we could debate extensively whether or not the S&P 500 Index is actively managed, I agree that it is. For me to consider the S&P 500 passive, it would have to comprise the top 500 stocks by market capitalization or, failing that, use rules-based screens with no reliance on the subjective judgments of committee members.

With that said, the real question is, Why does it matter if the S&P 500 is actively or passively managed? One reason the distinction might be important is because of an argument often raised by supporters of active management. They contend that the S&P 500 is not a fair benchmark because it’s really an actively managed index. Let’s examine if that claim has any validity.

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