Debunking Claims of Asset Manager Cartel Controlling US Corporations
In recent times, there have been claims suggesting the existence of a so-called “cartel” of asset managers that control major US corporations. This alleged cartel consists of the top three asset management firms, often referred to as the “big three.” However, it is important to separate fact from fiction when evaluating these claims.
If you are an investor with a 401(k), an individual retirement account (IRA), or even a regular brokerage account, there is a high probability that a portion of your investment is allocated to an index mutual fund or an exchange-traded fund (ETF). These investment vehicles commonly include stocks of multiple companies, providing broad market exposure rather than focusing on a single corporation.
The idea of a cartel controlling US corporations implies a concentrated and coordinated effort to take control and exert influence. However, this notion does not align with how asset managers operate. Asset management firms, including the big three, are fiduciaries that primarily aim to maximize returns for their clients. Their focus is on managing portfolios to achieve the highest possible returns within the boundaries of clients’ investment objectives and risk tolerance.
Furthermore, the claim that the big three asset managers control US corporations overlooks the fact that shareholders in most companies, including those in the S&P 500, are widely distributed across various institutional and individual investors. It is not just the big three asset managers that hold significant stakes in these companies. Other institutional investors, pension funds, and individual shareholders collectively own a considerable portion of shares, ensuring a diversified ownership structure.
While it is true that the big three asset managers collectively manage trillions of dollars in assets, suggesting they have significant influence in the market, it is essential to understand the nature of index mutual funds and ETFs. These investment vehicles aim to replicate the performance of a given index, such as the S&P 500, by holding shares in the same proportion as the index constituents. This passive form of investing aims to mirror the market rather than manipulate it.
It is worth noting that asset managers, including the big three, have voting rights on the shares they own. However, their voting decisions are typically based on their fiduciary duty and aligned with the best interests of their clients. Moreover, proxy voting guidelines and proxy advisors play an important role in providing policy frameworks and recommendations to ensure fairness and accountability in corporate governance.
To suggest that the big three asset managers control US corporations as a cartel oversimplifies the complex and decentralized nature of the capital markets. It disregards the diverse ownership landscape, the regulatory framework governing asset managers, and the principles of fiduciary duty that guide their actions.
In conclusion, it is crucial to critically evaluate claims before accepting them as factual. The idea of a cartel of asset managers controlling US corporations does not withstand scrutiny when considering the well-established practices and responsibilities of asset managers, as well as the broader ownership structure and market dynamics.