Active strategies usually involve bond swaps, liquidating one group of bonds to purchase

another group, to take advantage of expected changes in the bond market, either to seek higher
returns or to maintain the value of a portfolio. Active strategies are used to take advantage of
expected changes in interest rates, yield curve shifts, and changes in the credit ratings of
individual issuers.

Passive strategies are used, not so much to maximize returns, but to earn a good return while
matching cash flows to expected liabilities or, as in indexing, to minimize transaction and
management costs. Pension funds, banks, and insurance companies use passive strategies
extensively to match their income with their expected payouts, especially bond immunization
strategies and cash flow matching. Generally, the bonds are purchased to achieve a specific
investment objective; thereafter, the bond portfolio is monitored and adjusted as needed.

Strategic Investment
A strategic investment is a transaction that is closely related to joint ventures. In strategic
investments, one company makes an investment in another. These two companies enter into
agreements that are designed to serve shared business goals.
How is Strategic Investment Done?
Strategic investment begins with identifying and evaluating various projects and making a
selection that is likely to boost the companys competitive advantage.
In a strategic investment, the investor generally acquires common or preferred stocks in the
target company. A loan may also be taken for acquiring the debt securities of the target company.
Moreover, the two companies may enter into supply and sourcing contracts, technology sharing
agreements or research and development agreements. They may also form separate joint venture
entities for engaging in specified businesses.