Portfolio Management is concerned with making decisions about investment mix and policy, matching investments to objectives, asset allocation for individuals and institutions, and balancing risk against performance. (0) Briefly explain the difference between active and passive portfolio management. (2 marks) Explain the two main strategies in passive portfolio management and comment on the effectiveness of the strategies in achieving the desired outcome. (8 marks) Suppose two investors have formed portfolios, A and B, designed to track a particular benchmark. Over a period of three years, the returns to the portfolios as well as the index retums were as follows: Benchmark Year 2016 4.2 Managed portfolio Quarter AX 1 4.3 2 3.8 3 11 4 2.3 1 1.1 Z 3.4 3 8.9 4 -0.7 Managed portfolio / 3.9 48 10.5 3.2 0.8 2.7 02 2017 3.5 4.8 9.1 0.9 2018 1 8.2 0.6 7.9 4.9 3 0.3 6.2 8 7 5 3 4 5 0.2 Calculate the annualised tracking errors for the managed portfolios and explain which of the two managed portfolios performed better over the period and why? (10 marks)