Barbara Novick is Vice Chairman at BlackRock, Inc. This post is based on a Policy Spotlight issued by Blackrock.
Index funds have democratized access to diversified investment for millions of savers, who are investing for long-term goals, like retirement. As index funds are currently growing more quickly than actively managed funds, some critics have expressed concern about increasing concentration of public company ownership in the hands of index fund managers. While it is true that assets under management (or “AUM”) in index portfolios have grown, index funds and ETFs represent less than 10% of global equity assets. [1] Further, equity investors, and hence public company shareholders, are dispersed across a diverse range of asset owners and asset managers.
As of year-end 2017, Vanguard, BlackRock, and State Street manage $3.5 trillion, $3.3 trillion, and $1.8 trillion in global equity assets, respectively. [2] These investors represent a minority position in the $83 trillion global equity market. As shown in Exhibit 1, the combined AUM of these three managers represents just over 10% of global equity assets. The largest 20 asset managers only account for 22%. Moreover, about two-thirds of all global equity investment is conducted by asset owners choosing to invest in equities directly rather than by employing an asset manager to make investments on their behalf.