Oof.
Eh, he’s just probably poorly wording what he’s trying to say. I’m assuming his point is that if there were more competition amongst index funds then fees would be lower? Trying to be generous here.
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No way Bernie is tweeting about index fund fees. He probably doesn’t know that those numbers are driven by index fund ETFs.
The first part is meaningless without knowing how much of the whole pie the 22 trillion represents.
The second part is meaningless because “major shareholders” is undefined.
I think it’s pretty clear he’s conflating managing shares and holding shares or more likely just not thinking it through before hitting Tweet.
We think Bernie is writing his own tweets?
This is probably the correct answer. Some young staffer doesn’t understand how index funds work.
There is a legitimate impact arising from high concentration of stock ownership within a small number of index funds and that’s voting rights. In the traditional legal framework of common share ownership, the old fashioned thinking is that each shareholder gets a vote per share within governance systems like Board membership votes. The ability to vote as a shareholder is a theoretically powerful voter right, but most retail investors don’t place any value on that right. Within index funds, the cumulative shareholder voting rights of all the underlying stock ownership accrue to the fund manager. So to the extent that shareholder voting rights matter, for example in things like voting on ESG mandates to be adopted by the Board, these index funds have an illogical combination of being passive investors with a powerful voice in how the company is directed to be run by the Board.
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If you invest $100,000 in a Vanguard S&P500 fund, you pay $40 a year!
I’d rather pay $4,000 a year to get one meeting a year with an advisor that knows less than I do.
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I was wondering a few days ago if it was theoretically possible that some rich guy buys out 51% of Vanguard and Blackrock and then has incredible leverage over basically every company in the USA by voting with the index funds’ shareholder rights according to his personal wishes or if there is something in the legal structure of those funds which prevents taking activist positions.
I guess Vanguard is not publicly traded and not for sale but just assume it was at some point in the future. Is there some obligation for Vanguard to not take activist positions?
The main restriction here is that where the fund manager has to make proxy votes on behalf of the fund unit holders, the fund manager is obligated to vote in the best interest of the fund. So only “activist” positions that are thought to be in the best interest of the fund (and, by extension, the fund unit holders) are permitted.
The large passive investors are being pressured to allow their shareholders to influence their proxy voting. Blackrock has been trying to set something up to make it easier for owners of their funds to communicate their wishes to Blackrock, I’m not sure whatever happened to that.
This is of course a legitimate point, but…clearly not what Bernie (or his staffer) meant.
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VG is owned by its funds. Fidelity, interestingly, is already privately owned by the Johnson family.
Oh yeah, I have no idea what’s going on with that Bernie post. I just wanted to touch on the proxy voting point because part of my job involves fund manager oversight for our pension plans so I run into this stuff with managers/proxy voting/ESG etc. all the time.
So wait, we’re saying this is a bad tweet because “well actually most of their ownership of the stock market is because index funds”?
It’s more because the fund managers don’t really own the companies in the way that most people think of ownership. They are intermediaries between investors and companies.
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I suppose you could also say it’s a bad tweet because it just hangs that statement out there with the implication that it is obvious that it’s bad, but the more you know about the subject the less obvious it is that the statement is something we need to worry about.
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I miss Geocities.
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Most amazing part of that graphic is IMDB being a top 5 website in Jan 93