A critical assumption in that view is that the returns on actively and passively managed funds are independent. Are they, or are the passive funds freeriding on the work of the active funds?
Many have looked at this and presented the data far more eloquently than I could:
https://hbr.org/2013/05/just-how-useless-is-the-asset/
http://www.umass.edu/preferen/You%20Must%20Read%20This/Malki...