Passive investing is a style of investing where participants buy and hold a portfolio of stocks (generally a diversified bundle), instead of picking, choosing and trading hand-picked stocks regularly (which is called “active investing”).
Passive investing has exploded in popularity in recent years. Academics have consistently found that most active managers are not able to outperform the overall market, which means that participants can earn equivalent (or higher) returns by passively buying an ETF that tracks the overall market instead of paying fees to a broker to actively trade stocks.
Opponents of the rise of passive investing fear that it has caused an increase in corporate concentration. As more people pour money into ETFs and index funds, as the largest shareholders of many major corporations are now the same few index fund companies (Vanguard, Blackrock, State Street). These opponents worry that these shareholders will not push their portfolio companies to aggressively compete since they also are the largest shareholder of their industry rivals.
They also worry that the rise of passive investing has meant a decline in corporate accountability. When the largest shareholders of major corporations are also the largest shareholders of hundreds of other companies, they are not closely scrutinizing the behavior and strategy of each company in their portfolio.