Tracking Error

The volatility of a portfolio’s return differences from its benchmark — a measure of how actively a fund deviates. Low tracking error with high fees is the classic "closet indexing" criticism.

Go deeper

This term comes up constantly in asset management interviews and on the desk.

Hedge Fund interview prep

Related Asset Management terms

Go further than reading

The written material is free. These are the ways to get it applied to your own work.

Browse the full glossary — 150+ finance recruiting and technical terms, in plain English.