USC CLASS Research Paper No. 23-13
29 PagesPosted: 14 Apr 2023Last revised: 3 Jul 2023
See all articles by Dorothy S. Lund
Columbia Law School; European Corporate Governance Institute (ECGI)
University of Chicago Law School; European Corporate Governance Institute (ECGI)
Date Written: March 31, 2023
Abstract
A robust literature describes the incentives and stewardship practices of the “Big Three” asset managers (BlackRock, Vanguard, and State Street Global Advisors), often referring to these asset managers as “passive.” This is so common that the “Big Three,” “index fund,” and “passive manager” are used almost interchangeably by both academics and practitioners. This shorthand emerged in the foundational scholarship in this area, and while they may remain useful in certain contexts, their casual use obscures important features of the market and contributes to misperceptions. In this chapter, we demonstrate that it is a mistake to equate passive investing with index funds; index funds with the Big Three; and the Big Three with giant asset managers.
Although they are major providers of index funds, the Big Three asset managers also control trillions of dollars in actively managed funds and differ substantially from one another in important ways. The Big Three are also not the only giants on the Street; to take just one example, Fidelity’s growth over the last few years makes it hard to justify overlooking its role in corporate governance. Finally, the conflation of index fund with either the Big Three or “passive” obscures the fact that many index funds are sold by non-Big Three asset managers, as well as the enormous heterogeneity across index funds. All of this affects incentives to monitor and engage in stewardship. We sketch some of the consequences of these distinctions and set forth questions for further research.
Keywords: Big Three, passive investing, index funds, corporte governance
Suggested Citation:Suggested Citation
Columbia Law School ( email )
435 West 116th St
NEW YORK, NY 10027
European Corporate Governance Institute (ECGI) ( email )
c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium
University of Chicago Law School ( email )
1111 E. 60th St.
Chicago, IL 60637
United States
European Corporate Governance Institute (ECGI) ( email )
c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium
FAQs
Within the world of corporate governance, there has hardly been a more important recent development than the rise of the 'Big Three' asset managers—Vanguard, State Street Global Advisors, and BlackRock.
What are the big three index companies? ›
This Article examines the large, steady, and continuing growth of the Big Three index fund managers—BlackRock, Vanguard, and State Street Global Advisors.
Who are the largest index asset managers? ›
Largest companies
| Rank | Firm/company | AUM (billion USD) |
|---|
| 1 | BlackRock | 9,090 |
| 2 | Vanguard Group | 7,600 |
| 3 | UBS | 5,710 |
| 4 | Fidelity Investments | 4,240 |
16 more rowsThe top three U.S. stock indexes
- Dow Jones Industrial Average Index. $Dow Jones Industrial Average(. ...
- Nasdaq Composite Index NASDAQ Composite Index. $Nasdaq Composite Index(. ...
- S&P 500 S&P 500 Index. $S&P 500 Index(.
A robust literature describes the incentives and stewardship practices of the “Big Three” asset managers (BlackRock, Vanguard, and State Street Global Advisors), often referring to these asset managers as “passive.” This is so common that the “Big Three,” “index fund,” and “passive manager” are used almost ...
Who owns BlackRock and Vanguard? ›
Who Owns BlackRock? BlackRock is publicly owned, with its shares held by various shareholders, including institutional investors like Vanguard Group and State Street Corporation and individual shareholders. The specifics of these shareholders can change over time.
Who owns BlackRock? ›
Who owns BlackRock? BlackRock is not owned by a single individual or company. Instead, its shares are owned by a large number of individual and institutional investors. The biggest institutional shareholders such as The Vanguard Group and State Street are merely custodians of the stock for their clients.
Who is the largest global asset manager? ›
Vanguard takes institutional lead over BlackRock
BlackRock remains the world's largest asset manager overall.
Who is the largest index provider in the world? ›
S&P Dow Jones Indices
SPDJI is the world's largest provider of financial market indexes, and its most important index is the most widely followed one, the S&P 500.
How many portfolio managers beat the S&P 500? ›
According to SPIVA, no manager stays in the top 25% of all managers, let alone outperform the index for 5 years in a row. Only just over 1% manage to stay in the top half. In essence, those demonstrating superior performance today are highly unlikely to replicate that success in the upcoming year.
International developed stock fund managers were able to beat their respective indexes in four of the past 23 years, or 17.4% of the time. Meanwhile, emerging markets active fund managers fared even worse. They only managed to outperform in two years, or 8.7% of the time, during these 20-plus years.
What are the top 5 indices? ›
World Indices
| Symbol | Name | Last Price |
|---|
| ^GSPC | S&P 500 | 5,018.39 |
| ^DJI | Dow Jones Industrial Average | 37,903.29 |
| ^IXIC | NASDAQ Composite | 15,605.48 |
| ^NYA | NYSE COMPOSITE (DJ) | 17,576.39 |
32 more rowsDow Jones & Company
| Company type | Subsidiary |
|---|
| Industry | Publishing |
| Founded | November 1882 |
| Founder | Charles Dow Edward Jones Charles Bergstresser |
| Headquarters | 1211 Avenue of the Americas New York City, New York, 10036 U.S. |
7 more rowsAs mentioned, the Dow Jones Industrial Average, Nasdaq Composite, and S&P 500 are the three most popular U.S. indexes. The three indexes contain the 30 largest stocks in the U.S. by market capitalization, all stocks on the Nasdaq Exchange, and the 500 largest stocks, respectively.
Who is the number one asset manager in the world? ›
The research shows that BlackRock is both the world's largest asset manager and the first to exceed US$10 trillion.
Who are Vanguard and BlackRock? ›
Vanguard and BlackRock are the world's largest investment firms. Vanguard focuses more on passive options, and BlackRock offers a number of strategies. Vanguard and BlackRock both have unique and very different fee structures. Consider the fee structures, services, and investment options to make the best choice.
Who does BlackRock own? ›
What companies are owned by BlackRock? BlackRock has acquired several companies over the years, including Barclays Global Investor, which includes the popular ETF platform iShares. The investment manager also owns eFront, Kreos Capital, Aperio, and Merril Lynch Investment Management.
Who is the largest ESG asset manager? ›
The especially low-rated assets managers are four of the world's largest: BlackRock, Vanguard, Fidelity and SSGA. These four esg asset management firms collectively manage over $23trn (£17.8trn) in assets, which is a third of the total AUM of all the asset managers that ShareAction looked at.
