Sadly, this article is too simplistic. First, the “Passive is not Massive” conclusion is not supported by the visual. All the chart really tells us is that active and passive funds and ETFs have remained fairly steady at 26-28% of aggregate assets over time. What’s missing is detail on how the 72-74% is invested. The nearly three-quarters of aggregate assets MUST BE comprised to some degree of passive investment - it’s just the packaging (e.g., separate accounts, collective trusts) that’s different from OEFs/ETFs. It’s not clear here but I also wonder if some of the Fund/ETF component ignores what’s inside of the funds (e.g., target date funds that invest passively in equities).

Second, all the noise about primary and secondary trading is just that…noise. Price-setting of stocks is simply a function of supply and demand. To suggest that only active traders influence price is either simplistic…or disingenuous effort of those trying to downplay the price impact of passive investing. What passive ETFs reflect is a systematically static “package” of multiple stocks. On most days, there is no company-specific news for the vast majority of stocks. But supply and demand for the packages (e.g., SPY - SPDR S&P 500 Index ETF) communicates the aggregate market’s perception of the value of both the package AND its constituents. To test this logic, use a common sense approach…one morning we wake up and S&P 500 ETF sellers massively outweigh buyers. Do we really think that market makers, buyers and sellers of individual constituents of the index look at that information and say to themselves “that’s irrelevant…what do the active managers think”?