In my perspective, the right active management can outperform index funds. While index funds provide a passive, diversified, and low-cost investment strategy suitable for many, they inherently cannot take advantage of mispriced opportunities in the market. Active management, however, offers the possibility of outperformance by exploiting these pricing inefficiencies – although it requires skill and diligence. In periods of market overvaluation, active managers can also hold cash or hedge, whereas index funds remain fully invested, which can lead to larger drawdowns.