FULL DISCLOSURE up front - I work in the index/ETF business. I help maintain ~75 indices, many of which have ETFs linked directly to them. That being said, I

FULL DISCLOSURE up front - I work in the index/ETF business. I help maintain ~75 indices, many of which have ETFs linked directly to them. That being said, I fully believe there will always be active investors. As others have mentioned, if there is an opportunity to make money in the market due to something like passive index funds being slower on the uptake, it will be made. If I had to interpret the core argument being made here, it is basically that there is a fear of a positive feedback type scenario where money keeps getting dumped into companies simply because it always has. But it can be highly profitable to beat out the slow, passive money by doing your due diligence. For this reason, active management will always exist. Also, I am fortunate enough to work on some of the more complex and interesting products in the industry (at least I believe so, haha). I can tell you that there are definitely sanity checks put in place for this kind of scenario. Most of it revolves around fundamental ratios built into these product methodologies (i.e. P/E ratio must be within a rational range, company must produce stable income for the past 5 years, etc.). More importantly, securities in these portfolios are frequently weighted (at least in part) upon those fundamental ratios. So if a company starts to deteriorate, the size of the position in the fund will be decreased. Much of what the article talks about seems to be negated by this and becomes a non-issue. I think those arguments would apply more to benchmark products which don't have those kinds of requirements. Then again, many benchmarks are used for exactly that - benchmarking - and aren't directly invested in. There are, of course, indices like the S&P 500 that have significant sums of money attached to them, but they are the exception, not the rule. Most index products deemed "investment-grade" are STRATEGY based, not benchmark based. Basically, there is room in the market for both. I think we are simply seeing the progression towards a new equilibrium, nothing more. That equilibrium is where the new balance of those willing to take a higher risk meet those that want the less risky, low cost products that we provide. There is simply a much smaller portion of the population willing to pay higher fees and have a larger risk (but with possibly greater reward). And that is due in part to the fact that many money managers don't have the returns to keep people coming back. It's also due in part to people's mistrust of the market (and financial industry in general). They are simply allocating their money in accordance with their risk appetite.