What are the two forms of semi-active strategies?

Semi-active strategies, also known as enhanced indexing or active overlay strategies, typically involve a combination of passive investment principles with selective active management tactics. The correct answer highlights two common approaches used within semi-active strategies: derivatives-based strategy and stock-based strategy.

The derivatives-based strategy involves utilizing financial derivatives to achieve specific investment objectives, hedge risks, or gain exposure to assets without holding them directly. This can enhance performance or manage risk while maintaining an overall passive investment framework.

On the other hand, stock-based strategies focus on specific stock selection while still adhering to a broader passive index strategy. Investors may employ active stock selection techniques to generate alpha, but the investment approach remains closely tied to the underlying index.

Together, these strategies enable fund managers to potentially outperform traditional passive strategies while limiting deviations from the benchmark index, thus aligning with the semi-active strategy definition.

While the other choices include different types of strategies, they do not accurately represent the focused combination found in semi-active strategies. Options that suggest combinations of strategies that are purely active or passive do not capture the hybrid nature of the semi-active approach.