Passive funds are on pace to eat the entire US stock market by 2030
Index funds are on a roll. Funds that passively track indexes are popular because they’re cheaper than the alternatives run by active money managers, and the robotic, rules-driven funds often outperform their human rivals, too.


Index funds are on a roll. Funds that passively track indexes are popular because they’re cheaper than the alternatives run by active money managers, and the robotic, rules-driven funds often outperform their human rivals, too.
In fact, passive funds will swallow up the US stock market before too long, according to Pictet Asset Management (paywall). Index trackers currently hold more than 40% of US stocks, according to Pictet’s analysis, and if the present rate of growth continues they could eventually own everything by 2030, or perhaps a bit before. Passive funds now control more than 30% of all US assets:
One line of thought is that the market will eventually fix itself. If prices get too far out of line because of passive funds’ peculiar behavior, active managers will have an easier time making money by exploiting the irregularities. When they shine—and generally active managers haven’t shined for some time (paywall)—cash will flow back in their direction. In theory.