The point is is that it becomes easier to beat the market the more people are indexing. Thus there become more people consistently beating the market. Identification of such is still an issue, but not as difficult.
"Look more closely at those gaudy returns, however, and you may see something startling. The truth is that very few professional investors have actually managed to outperform the rising market consistently over those years. In fact, based on the updated findings and definitions of a particular study, it appears that no mutual fund managers have."
At this point, Mutual Funds are the bottom of the barrel with respect to attracting talent for active management. There are plenty of examples of active funds that have consistently beat the market.
ex: Since Horseman's inception in February 2001, the fund has achieved annualized returns of 14.79%, according to HSBC.
According to A Random Walk Down Wall Street, there are many examples of funds that have consistently beat the market over 5-10 years, but there are very few that outperform the market over a longer time horizon, and oftentimes they underperforming in the subsequent time periods (Peter Lynch's Magellan fund is the one counterexample given).
I'm as big a boglehead as there is. Nevertheless, imagine you're the only person in the world not indexing. It's going to be quite easy to beat the market. Everyone else in existence is using market cap as the sole criterion for determining where to put their money. In this case all the other indicators for success are being ignored and not priced into the current price of the stock. In other words, if the whole world indexes the market becomes very inefficient.
