The price of passive investing has been dropping since 2014, but there are still funds around whose price is problematic, according to Tom Poulter, head of quantitative research at Square Mile.
Speaking on the FTAdviser In Focus podcast Poulter said there was big downward price pressure after Fidelity launched a range of competitively priced products in 2014, and these have somewhat eased since.
"In the past couple of years the reductions probably haven't been as significant because there is a limit to how cheap you can have a passive fund," he said.
But he added: "Unfortunately some of the work we have done shows there is still about £12bn in UK passive funds with an OCF above 0.3 per cent and that's probably been the same for a number of years.
"I know some of them have said, well a lot of the time you are going direct with them... but I do think everything direct that's above 40 basis points is too expensive and I don't know if this is something that the Financial Conduct Authority need to look into."
He said there were two big trends in the passive space at the moment: greater adviser take-up and a booming environmental, social and governance interest.
"Active still represent the majority of AUM, but increasingly it's becoming more passive. I don't think we're at a point yet but I do see in potentially five or six years' time we are getting to a point where passives become potentially just too big."
He said the danger is that certain rebalance dates, such as when Royal Mail was added to the FTSE 100, will cause liquidity issues as a large number of passive managers buy that stock and sell the one removed from the index.
"It comes to a point where passives could be quite large, where around these rebalance dates [the question is] is there enough liquidity? I don't think we are there yet to be concerned but that's something to keep an eye on."
The second trend is the surge in ESG investing, which is bringing down ESG prices. "Increasingly what we are seeing is all the passive providers are excluding all the sins companies but they are slightly tilting towards companies with good sustainable, responsible credentials." As a result, Poulter said, the OCFs of these funds are reducing.
Anthony Villis, managing director of First Wealth, a financial advice business engaged in passive investing, also appeared on the podcast.
He said First Wealth had used a combination of active and passive investments some years ago, but decided to put in place a passive approach for all clients five years ago, after finding "the overwhelming amount of evidence now suggests that active fund managers tend to underperform the index over a period of time".