Dr$.$ Wong is an equity portfolio manager with two new clients: The Hong Kong University Endowment Fund and the Tung Wah Group Foundation.

The Hong Kong University Endowment Fund $($the Fund$)$ is overseen by an investment committee. Wong is tasked with developing a strategy for the equity portion of the Fund's portfolio. In her initial meeting with the Fund's investment committee, Wong compiles the following notes:

The Fund pays taxes on interest, dividends, and realized capital gains.

The committee expects an increase in interest rates.

The committee believes that equity markets are highly efficient.

The committee mandates that the portfolio shall have minimal tracking risk.

Questions $1$:

a$.$ Compare active and passive investment approaches. $5^{\text{'}}$

b$.$ Which investment approach do you recommend Wong to choose? $5\text{'}$

c$.$ Based on Dr$.$ Wong's notes, why the approach you chose is appropriate for the fund's portfolio? $5\text{'}$

Before hiring Wong, the Tung Wah Group Foundation's portfolio had been managed internally. Wong reviews a memo from Tung Wah Group's investment committee that summarizes the previous internal manager's approach to portfolio construction:

"The manager used a growth at a reasonable price $($GARP$)$ investment approach to identify attractively priced stocks. He emphasized understanding a firm's governance structure, management quality, business model$/$competitive landscape, and environmental, social, and governance $($ESG$)-$related attributes. The portfolio generally held less than $60$ stocks, significantly less than the number of stocks in the benchmark and the portfolio was not well diversified."