The more fund managers you have, the more efficient capital allocation you'll have. The fact that mutual fund managers do not beat the market means that we have too many fund managers chasing diminishing returns. The increased efficiency in the markets is too small for their wages.
As the fraction of active fund managers to passive fund managers decreases, this fact will change. More and more passive investors following in the footsteps of less and less active investors. This means the tracking error will increase. At some point the cost of the tracking error will be about the same as the cost of active management, and that is when we have the right amount of active management.
As the fraction of active fund managers to passive fund managers decreases, this fact will change. More and more passive investors following in the footsteps of less and less active investors. This means the tracking error will increase. At some point the cost of the tracking error will be about the same as the cost of active management, and that is when we have the right amount of active management.
I think at least