While active investment involves an asset managermaking investments with the aim of outperforming a benchmark index, passive investment requires an asset manager to replicate the benchmark index by incorporating the constituent assets in similar proportions (weights) and thereby matching the returns of the index.
Congress, the SEC and other regulators have agreed that as long as the research purchased assists the manager in making investment decisions, the clients benefit and its legally acceptable.
For investors, there can be concern that an investment manager is making overly optimistic assumption about illiquid assets in order to boost management fees that are calculated as a percentage of assets under management.