It is easy to see why investors like passive strategies, such as Exchange-Traded Funds. They are low-cost, and promise a ready source of liquidity. But every market upside comes with a downside.

Passive strategies are starting to threaten sections of the bond and equity markets in a number of ways, due to their sheer size. According to credit rating agency Moody’s, index funds could account for more than half the US equity market as soon as 2021.