Few trends have reshaped modern finance as profoundly as the rise of passive investing. With its promises of low cost, diversification, and reliable long-term returns, it has become the default strategy for millions of retail and institutional investors. Over the past decade, index funds and ETFs have attracted relentless inflows, while active managers have faced steady redemptions.
Today, passive vehicles are estimated to represent roughly half of global equity market capitalization — and that figure continues to climb. The true share is likely higher when accounting for “closet indexers” among institutional managers.
These flows are not primarily the result of deliberate investment choices but of a complex web of policy incentives, regulatory frameworks, and automated default settings that most investors - retail or professional - barely notice.