What is the difference between active and passive investing?

In the investment world, there’s debate over what’s “active” versus “passive.” At Integrity, we see these terms as insufficient.

Investors used to align with either a market cap weighted index strategy because they believed all information is already priced or a concentrated active strategy that seeks to profit on unpriced information.

We now know that there can be good reasons to deviate from the market portfolio besides information arbitrage, like gaining exposure to new uncorrelated risk premium (which would not require taking on the costs and risks of information arbitrage).