This is true only to a certain extent. Mutual funds have been getting squeezed and the impact, though not immense, trickles down to millions of middle class investors.
No. The opposite is true. Vanguard, one of the largest and beyond a doubt the most trustworthy mutual fund complex, is on the record repeatedly as saying HFTs have lowered their cost of trading.
Where did you get your claim from? I can source mine, if you really need me to.
Vanguard runs etfs mostly, so I'm not sure why they care about support small spreads since they probably do a lot of efp trades (I'm not sure how the underlying prices are determined, but I think they can convert at a set price). The mutual funds and hedge funds who are more fundamental will try and buy or sell large blocks, so they're more affected by adverse market moves from trying to dump $1M of apple. I could see VG's attitude change a little since there are more traders engaged in rebalancing arb. If you know that the S&P index has to allocate more money to a certain stock, you can buy it ahead of time and sell to VG for a slightly higher price. If you're a passive fund with $1B in an etf, everyone knows what you're obligated to do. It's basically stat arb with higher probability. I still buy VG funds though