It has done this rather well historically. A failing, badly managed company is most of the time going to be worth less than a highly successful one or one that'

It has done this rather well historically. A failing, badly managed company is most of the time going to be worth less than a highly successful one or one that's growing and gaining traction. That's why when a company beats quarterly earnings, the stock price goes up. It's also why Enron's price crashed when their fraud was revealed. That means capital is typically and on average flowing in a productive direction versus the alternative, which is good for the economy for obvious reasons. HFT isn't relevant to this picture, their role is primarily market making and arbitrage and they have no net impact on pricing. Their sole role is to replace human market makers in a liquidity provision capacity, which reduces the cost to the active manager of doing business, at the expense of the extinct human market maker. Hedge funds aren't that consolidated. There's lots of them. There's no such thing as market power (in terms of oligopoly or monopoly power) for the industry either. The bigger you are, the harder it is to operate on a marginal basis, since price impact becomes prohibitive. Hedge fund spin offs are a dime a dozen since all the IP is in individual's heads. The biggest ones are resigned to longer bets where the edge is smaller. Market power is a thing only for HFT firms, due to economies of scale and scope on the tech and fee side, but as mentioned above HFT aren't relevant to what we are discussing. Index funds chase valuations set by active managers since they're typically investing in market cap weighted indices. Their existence doesn't change the value add or necessity of accurate security pricing, and they're not really relevant to that either.