How big index fund and ETF providers have increased their sway over publicly-traded companies while potentially discouraging competition. What can be done about it?
Topics covered include:
How market share for assets under management has become increasingly concentrated with big fund complexes like Vanguard and BlackRock
What is a fiduciary relationship and how do asset managers serve as fiduciaries
Why do investors in index funds and ETFs have no input as to how fund sponsors vote on shareholder proposals
What percentage of outstanding shares do Vanguard and BlackRock own of publicly traded companies like Apple, Target, or gun manufacturers
How Vanguard and BlackRock use engagement and voting policies to influence publicly traded companies, particularly when it comes to climate risk and diversity
How ownership by Vanguard and BlackRock in publicly-traded companies in the same industry could discourage competition.
What can be done through regulation or through individual action to reduce Vanguard and BlackRock’s influence
340: Climate Change, ESG, and What Should Investors Do?
Transcript
Welcome to Money For the Rest of Us. This is a personal finance show on money, how it works, how to invest it, and how to live without worrying about it. I’m your host, David Stein. Today’s episode—390. It’s titled “Are BlackRock and Vanguard Too Big and Powerful?”
Too Much Control?
I recently received an email from a long-time listener; she is in her 80s. She mentioned that her individual retirement account, all of her grandchildren’s college 529 plans, and most of the rest of her net worth is managed by Vanguard.
She finds Vanguard easy to work with. They’ve provided helpful tax management strategies, but she sent me an article that concerned her. It was an editorial in the New York Times by Farhad Manjoo. It was titled “What Blackrock, Vanguard, and State Street are Doing to the Economy.”
Manjoo suggests these three asset management firms control too much of the economy. How can that be? Aren’t they just investing in stocks on behalf of their clients, most of which are in index funds? Yes, of course, but the amount that they manage in assets keeps growing.
The most recent ICI Fact Book had an interesting chart. It showed in 2005, the five largest fund complexes, which would include Vanguard and BlackRock, controlled 35% of total assets in mutual funds and ETFs. By 2021, or year-end 2021, it was 54%.
The top 10 now controls 66% of assets and the top 25, 83% of assets. The two largest by far are Blackrock with $9.6 trillion in assets under management, followed by Vanguard with $8.1 trillion in assets under management.
BlackRock recently wrote in an investment stewardship update that (paraphrasing) “the assets we manage are owned by other people, our clients, who depend on Blackrock to help them achieve their investment goals.These clients include public and private pension plans, governments, insurance companies, endowments, universities, charities, and ultimately, individual investors among others, are voting on client’s behalf were so authorized by them and will always be undertaken with the appropriate consideration of our client’s long term economic interests as their fiduciary.”
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As of February 2024, ETF.com estimates Vanguard funds represent 30.1% of the total equity ETF market while BlackRock accounts for another 29.4%. State Street is a distant third, with a 14.8% share. In other words, the big three's funds account for a combined 74.3% of the entire equity ETF market.
BlackRock is one of the world's largest investment management companies by AUM. The company operates as a single business segment. The firm derives most of its revenue from investment advisory and administration fees.
As of the first quarter of 2024, the New York City-based asset management company BlackRock had total assets under management (AUM) of around 10.5 trillion U.S. dollars. This compares to 8.59 trillion U.S. dollars of AUM as of 2022. The total assets under management of BlackRock Inc.
Vanguard set out in 1975 under a radical ownership structure that remains unique in the asset management industry. Our company is owned by its member funds, which in turn are owned by fund shareholders. With no outside owners to satisfy, we focus squarely on meeting the investment needs of our clients.
Originally funded by the private equity giant Blackstone, the company has since become its own publicly traded company. The company owns 84,567 homes, of which 11,862 are in California, according to its most recent filing with the Securities and Exchange Commission.
The intrinsic value of one BLK stock under the Base Case scenario is 760.49 USD. Compared to the current market price of 856.2 USD, BlackRock Inc is Overvalued by 11%.
How do the investment strategies of BlackRock and Vanguard compare? BlackRock offers a more diverse range of investment strategies, including both passive and active management, whereas Vanguard predominantly emphasizes its passive investment approach.
Companies using BlackRock Aladdin for Portfolio and Investment Management include: Microsoft, a United States based Professional Services organisation with 221000 employees and revenues of $243.00 billion, MetLife, a United States based Insurance organisation with 45000 employees and revenues of $66.41 billion, Swiss ...
Key Points. BlackRock is the world's largest investment manager, with $10 trillion of assets under management. There's a lot of misunderstanding about the companies BlackRock owns and what it does. The company owns several investment management and technology platforms.
In the world's largest Wall Street derby, Vanguard Group Inc. for the first time won the institutional asset management race by a nose in 2022, beating out BlackRock Inc. for most institutional assets under management worldwide.
Actual Assets Under Management (AUM) is this value plus cash (which is not disclosed). BlackRock Inc.'s top holdings are Microsoft Corporation (US:MSFT) , Apple Inc.(US:AAPL) , NVIDIA Corporation (US:NVDA) , Amazon.com, Inc.(US:AMZN) , and Meta Platforms, Inc.
Apple is a public company owned by numerous institutional and individual investors. The largest share of AAPL outstanding stock belongs to institutional investors, including the world's largest asset management groups such as Vanguard, Blackrock, and Berkshire Hathaway.
Vanguard is poised to parlay its US$4.7 trillion of assets into more than US$10 trillion by 2023, while BlackRock may hit that mark two years later, up from almost US$6 trillion today, according to Bloomberg News projections based on the companies' most recent five-year average annual growth rates in assets.
Together, BlackRock and Vanguard own 18% of Fox, 16% of CBS, 13% of Comast — which owns NBC, MSNBC, CNBC, and the Sky media group, 12% of CNN, and 12% of Disney — which owns a number of subsidiaries.
The Vanguard Group, Inc. (commonly known as simply Vanguard) is an American registered investment advisor founded on May 1, 1975 and based in Malvern, Pennsylvania, with about $9.3 trillion in global assets under management as of May 2024.
Introduction: My name is The Hon. Margery Christiansen, I am a bright, adorable, precious, inexpensive, gorgeous, comfortable, happy person who loves writing and wants to share my knowledge and understanding with you.
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