Why is passive winning?

The ‘80s were an active time. Active management was what it was about back then. There were more than 2,000 actively managed funds by the end of the decade— not a mention of indexing. Fast forward to today—passive interest is through the roof.

The bars represent flows into active and passive funds. Look what happens in the early 2000s. Passive really starts to pick up and active starts to decline. If you add those bars up, you’ve got about a trillion dollars in flows into passive funds at the expense of active funds—it’s about a trillion the other way. Why is passive winning at the expense of active?