Enhanced indexing attempts to generate modest excess returns compared to traditional index funds and other passive management techniques.
Enhanced indexing resembles passive management because enhanced index managers cannot (in principle) deviate significantly from commercially available indices which are derived from statistical bureaus like S&P Dow Jones Indices or FTSE Russell.
Enhanced indexing strategies usually have low turnover and lower fees than actively managed portfolios.
[1] However, enhanced indexing partially resembles active management because it allows managers the latitude to deviate from an underlying index.
These deviations can be used to minimize transaction costs and turnover, or to maximize tax efficiency.