There are two popular approaches in the formal investment management industry. The first approch is based on the assumption that markets are 'efficient' and the other segment believes that there are opportunities to be found by performing appropriate robust investment analysis to identify securities such as stocks or bonds that are incorrectly priced. The attached exhibit shows the growth in "passive" investments who follow the first approach.

(a) Describe how you evaluate market efficiency in view of the recent growth in passive investments.

(b) Given that both approaches still have significant assets, do you believe equity markets are "efficient"? If so, in what form (strong, semi-strong, weak)?

(c) Assume that passive investments (currently about 50% of the overall ) get close to 100% weight. Discuss the impact on markets of such an event. Would markets continue to remain efficient or not?

(d) If you were the CEO of an active investment management firm, how would you use the above facts to structure your investment strategies? List the key variables or factors you would consider in your planning.