Actively managed funds are investment funds where a team of professionals makes decisions about buying and selling assets to achieve better returns than a specific benchmark, like the S&P 500. These managers analyze market trends, economic data, and individual securities to identify opportunities for growth. Unlike index funds, which passively track a market index, actively managed funds aim to outperform the market through strategic trading. This approach often involves higher fees due to the research and management involved, but it can potentially lead to higher returns if the managers are successful in their strategies.