Equity CFA Level3 Intro

CFA Level III Equities
#1

Hi all, quick question on Equity, curriculum p327 Reading22 6.3 Suitable Benchmark.

Seems like a minor point but I don’t get this paragraph at all, can someone who understood this possibly shed some lights please? Thanks in advance:

image
image752×264 50.4 KB

i.e. why do they prefer passive investment?

#2

If the correlation among the assets in the index is too high, e.g same sector, it will be difficult to generate enough alpha. Hence an broader index is preferable for active management.