European lawmakers have taken aim at the influence of the largest index fund managers. Last week the European Parliament cited OECD research and warned that higher levels of common ownership result in “hidden social cost and reduced product competition”. Sven Giegold, a Green MEP, called for action from the European Commission, saying that “the effects of [large passive funds] have to be taken into account and regulated.” This could have effects on the “big three”: BlackRock, Vanguard and State Street that collectively own 17.6% of 1,662 listed US companies, according to figures analysed by the OECD in 2017.
In response, BlackRock states that “the debate on ‘common ownership’ should be . . . grounded in accurate and robust analysis” and claims that such analysis at the moment does not exist. Fund groups also argue that “common ownership” fails to take into account proxy advisers, which have substantial influence over shareholder votes. This way, according to Barbara Novick, BlackRock's vice-chair, attempts to curtail the power of asset managers is merely an attempt “to fix a problem that does not exist”.
The full article is available on Financial Times.