[nabla9]

As long as there are at least some active investors left they can, because they follow price changes set by active investors passively.

If index funds start to create systematic valuation errors, active strategies start to perform better and they start to outperform index funds. This is not the case, because index funds beat active fund management constantly over longer periods. (The article raises concerns of corporate governance and accumulation of power that is different issue).

Matt Levine https://www.bloomberg.com/opinion/articles/2016-08-24/are-in...

>there is an alternative view that the rise of passive investing will improve capital allocation, because bad active investors will be driven out but good ones will remain. The passive investors can't influence relative prices, since they just buy the market portfolio, meaning that the fewer but better active investors will continue to make the capital allocation decisions. On this view, lower returns to active management are a sign that prices are more efficient and capital allocation is getting better

[kolbe]

>index funds beat active fund management constantly over longer periods

This was only the case because 'long periods' include the periods in which free riders (indexes) were small relative to the active and activist shareholders.

[nabla9]

This is still the case and nothing indicates that things have changed.

Index funds have two main benefits:

* Lower cost,

* Never miss a new trend. At any moment only handful of stocks are responsible for disproportionate growth and index funds catch them all.