Elon Musk, Cathie Wood say passive investing has become a 'major...

Elon Musk and Cathie Wood claimed in a Twitter post that the growing popularity of passive index funds has become a "big problem" because the executives of these funds are gaining too much power over the boards of public companies.

"Decisions are made on behalf of real shareholders against their interests! Big problem with passive funds / index," the Tesla boss wrote on Twitter on Wednesday.

Katie Wood, CEO of ARK Invest, added: "I think history will see a rapid transition to passive funds over the last 20 years, such as the massive distribution of capital."

Well-known venture capitalist Marc Andreessen took two important steps after noting that key financial figures, such as BlackRock CEO Larry Fink, have a lot of influence in corporate America when it comes to managing agendas like ESG. But Wood also noted that passive investors are losing some high-yield stocks.

Tesla is the major shareholder in Wood's flagship ETF, ARKK: the electric car company accounts for almost 10% of the fund. Wood, who is still optimistic about Tesla, claimed that passive investors lost the Tesla meteor shower.

"Passive funds prevented many investors from enjoying a 400-fold increase in TSLA value after joining the S&P 500 in December 2020, ten years after the $ 1.6 billion IPO in June 2020. 2010," Wood wrote on Twitter.

Wood is one of the most prominent asset investors, but has had mixed results in recent years. In 2020, he won more than 150%. However, in 2021 it closed the year with a price lower than 20%. And this year, his year has been almost 50% lower so far.

This is due to the fact that passive mutual funds have a growing market share: about 60% of all equity assets are in passive products such as ETFs. Passive investments have lower payments than hedge funds and other investment assets and have exceeded many active funds in recent years.

However, Jack Bogle, the founder of Vanguard, the founder of the first major index fund, sounded the alarm that even if index funds could help medium-sized investors, the giant institutions could gain unnecessary control.

In an article published in the Wall Street Journal a few months before his death, Bogle wrote: "If historical trends continue, a handful of giant institutional investors will one day retain voting control over almost all of corporate America."