Background In recent times there has been some controversy regarding the returns from passive investment strategies compared with active investment strategies. Similarly, there has been an uptake in investing in Socially Responsible Investment (SRI) Indices (e.g. and faith based or environmentally social corporate governance (ESG) or corporate social responsible (CSR) stocks and indices) and their constituent stocks as opposed to all stocks that can include ‘sin’ stocks (e.g. Hong &; Kacperczyk 2009). The prescribed textbook (Bodie, Kane &; Marcus 2014) discusses passive indices in general from an academic perspective (e.g. see Chapter 6, section 6.6, pp. 187–190). On the other hand, from a practical perspective, a famous stock investor (i.e. active) in the US, Warren Buffet, has suggested many people would be better off to invest in a passive index in the long run compared with active investing as the passive index has a lower fee structure (e.g. see Tuchman 2014). There has also been some research suggesting SRI indices (stocks) can outperform a benchmark index (e.g. Becchetti et al. 2015). Brief Assume you have just began working for an SRI fund and your Chief Investment Officer (CIO) wants you to spend your first week of employment investigating the returns over at least the last seven (7) years for a passive SRI (i.e. Index e.g. S&;P 500 Environmental &; Socially Responsible Total Return Index, etc. (see https://au.spindices.com/indices/equity/sp500environmentalsociallyresponsibleindex) and active (e.g. 10 SRI stocks and 10 nonSRI stock in a portfolio) investment strategies. Assume the annual fees for the passive strategy are 0.25% and fees/costs for the active strategy are 0.04% for each buy/sell (i.e. roundtrip) transaction. Design a passive strategy i.e. an index of the riskfree rate and a SRI stock market trading index in the country of your choice from at least 30 September 2010 to 30 September 2017. Calculate your passive returns each calendar year (i.e. or part thereof) over the period 30 September 2010 to 30 September 2017. Design a diversified portfolio of 20 listed stocks; 10 SRI and 10 nonSRI (i.e. in the same country/exchange(s) as in 1 above; and equallyweighted at the beginning e.g. in 30 September 2010), that you will select as of 30 September 2010 and actively trade as of the period 1 October 2010 to 30 September 2017. You can trade any five stocks every quarter and 20 stocks in a year (i.e. or part thereof). Calculate your active returns each year (i.e. or part thereof) over the period 1 October 2010 to 30 September (e.g. see textbook, chapter 24). All calculations can be provided in worksheets/spreadsheets tables in appendices (e.g. or as an embedded file). In your new role after just completing your MBA you will be managing a small active fund (e.g. $50 million) with the CIO mentoring you. The CIO realises that the 7year period is all past data and you could easily “game” the data to make the active portfolio have greater returns than the passive strategy (i.e. the risk free rates and the SRI Index – from a country). Therefore the CIO wants you to clearly explain to them why you select the 10 SRI and 10 nonSRI stocks you do, etc., e.g. what are the reasons and theory behind what you do (e.g. large, medium or small stocks, value or growth stocks, etc.), as they will expect you to carry out similar strategy(ies) as a manager. Explain in an indepth, critical and reflective way the strategy(ies) your active portfolio strategy adheres to and financial theory(ies) your strategy(ies) are based on. Critically evaluate and compare your results from your active and passive portfolio returns. Discuss your analysis based on theory; your results and other empirical research the statements in the case study outline i.e. why an SRI passive portfolio strategy (i.e. the risk free rate and an SRI index) would have higher (lower) returns than an active portfolio strategy based 50% on SRI stocks and 50% on nonSRI stocks (e.g. make any assumptions you may use in your case study very clear).