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
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FAQs
Using the Big Three as shorthand for BlackRock, Vanguard, and State Street Global Advisors obscures differences and creates misunderstandings about the market. Investors and academics have often referred to BlackRock, Vanguard, and State Street Global Advisors as the Big Three asset managers.
Who is the Big 3 fund manager? ›
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.
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 three largest index fund managers—BlackRock, Inc. (“BlackRock”); State Street Global Advisors, a division of State Street Corporation (“SSGA”); and the Vanguard Group (“Vanguard”)—collectively known as the “Big Three,” own an increasingly large proportion of American public companies.
Who manages the S&P 500 index fund? ›
The S&P 500 is maintained by S&P Dow Jones Indices, a joint venture majority-owned by S&P Global, and its components are selected by a committee.
Who is the godfather of index funds? ›
John Bogle was an investor and founder of the Vanguard Group, one of the largest investment firms in the world. Bogle created index investing, which allows investors to buy mutual funds that track the broader market.
Who are the top 5 asset managers in the world? ›
The top 5 of asset managers included in this ranking are BlackRock, 9,464 US$b, (They hit 10tn AUM as per December 2021), Vanguard, with 8,400 US$b, UBS Group, one of two European Asset Managers who made the Top 10 with 4,432 US$b, Fidelity with 4,230 US$b, and State Street Global Advisors with 3,860 US$b.
Who is the world's largest asset manager? ›
BlackRock, Inc. is an American multinational investment company. It is the world's largest asset manager, with $10 trillion in assets under management as of December 31, 2023. Headquartered in New York City, BlackRock has 78 offices in 38 countries, and clients in 100 countries.
Does BlackRock own the world? ›
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.
Who owns Vanguard? ›
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.
BlackRock can then use its proxy voting infrastructure to cast votes based on the client's selected voting policy. Clients have the choice to rely on BlackRock Investment Stewardship for all of their voting decisions.
What are the 3 main asset management types? ›
Historically, the three main asset classes have been equities (stocks), fixed income (bonds), and cash equivalent or money market instruments. Currently, most investment professionals include real estate, commodities, futures, other financial derivatives, and even cryptocurrencies in the asset class mix.
Who are the biggest fund managers? ›
Rankings by Total Managed AUM
| Rank | Profile | Managed AUM |
|---|
| 1. | BlackRock | $10,470,000,000,000 |
| 2. | Vanguard | $8,700,000,000,000 |
| 3. | Charles Schwab | $7,320,000,000,000 |
| 4. | State Street Corporation | $4,340,000,000,000 |
92 more rowsThe most popular index providers are MSCI, S&P, STOXX and FTSE.
Who is the biggest index fund provider? ›
The 10 largest mutual fund and ETF providers did not change from 2021 to 2022. Vanguard and iShares, the top two brands, both saw net inflows in 2022.
