Index Funds-The Good and Bad?

22% of All Indexed Shares are Held by Three Companies

Bloomberg Businessweek Reports “The Great Index Fund Takeover”. “The Big Three-BlackRock, Vanguard and State Street-may be the most important players in corporate America. Whether they like it or not.” Bloomberg Businessweek January 14, 2020 pp20-25.

Compared to actively-managed stock funds, on average passively-managed stock funds indexing the market, have lowered investing costs and are returning more to your 401K or IRA. But does having “The Big Three” owning, on average, 22% of shares in a typical S&P500 company have an overbearing influence? While funds claim to not “vote as a bloc” critics suggest that other meddling can have an impact regarding “mergers, major investment decisions, CEO succession and director elections. Some “environmental and consumer groups” believe index managers are “shirking their broader social responsibilities” and others believe the comingling of similar companies reduces competition. Most critics are agreeing concentrating ownership may be causing “disappearance of small businesses, fewer start-ups, lower wages and loss of privacy”. As of August 2019, there were $4.3t in equity index funds and $4.2t in actively managed funds. See the article for details

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