Are mutual funds considered active or passive investors?

Mutual funds are typically considered passive investors when they are index funds or other types of funds that aim to replicate the performance of a benchmark index. This passive management strategy means they invest in a diversified portfolio of securities and do not frequently trade, aligning their performance with the index rather than attempting to outperform it through active management.

When mutual funds file a Form 13G, it usually indicates that they hold a significant position in a company and are not looking to influence that company’s management or operations, contrasting with active investors who file a Form 13D, which is used when an investor intends to influence or gain control of a company. This distinction highlights the passive nature of mutual funds in relation to index replication and their approach to investing without seeking to engage directly with the companies in which they invest.

This context clarifies why option B appropriately categorizes mutual funds as passive investors that file a 13G, reflecting their investment strategy and regulatory responsibilities.