These assets management scale rich giants, through the companys shareholding indirectly affect all aspects of our lives, financial anti-monopoly may become the next focus of global regulation.
The article new fund trust: how large asset management controls our economy and how to deal with it proposes that we should strengthen the supervision of asset management giants
How do asset management giants influence social agenda?
There is no doubt that the three giants, especially BlackRock, the worlds largest asset management company, form a certain monopoly position: they hold a large number of shares of many companies through passive fund products, and become the major shareholders of many companies, which has a huge impact on the global financial market and corporate governance.
According to the above report, BlackRock holds 97.5% of the constituent stocks in the S & P 500 index, and the minimum holding of individual stocks is more than 5%, which makes BlackRock play an important role in how enterprises deal with social issues such as climate issues.
BlackRock manages more than $87 billion worth of fossil fuel companies shares, and between 2015 and 2019, 80% of their climate related shareholder issues were opposed or abstained by BlackRock, the report said.
In his report, Steele said that whether people knew this fact or not, this connection and influence meant that BlackRock had probably influenced most peoples lives in some way.
The report also points out that these companies gradually control the growing financial market and American enterprises to nearly the size of US GDP, pointing out that the rise of the three asset management groups is inherently dangerous.
The AFL has allowed BlackRock to participate in this years economic rescue
Why do giants occupy such a large market share?
The size of these three Mega fund companies is largely driven by the rapid growth of cheap exchange traded funds in recent years.
The rise of exchange traded funds (ETFs) has overturned the previous solution of active management. Passive investment covers a large area of stocks in the benchmark index, making the breadth and depth of asset management institutions holdings reach an unprecedented height.
These three companies are all heavyweights in the ETF industry. Retail investors undoubtedly benefit from the rise of ETF. The fees charged by ETF are much lower than those of actively managed funds.
At the end of this year, the asset management platform of iShares was $2.9 trillion. According to the report, the three companies have a 73% to 80% share of the global ETF market, and they control 45 of the worlds top 50 ETF funds.
Mr Steele said the industry had become an oligopoly dominated by three big players.
Scholars suggest: control scale and strengthen supervision
It is understood that the organization, the US economic freedom program, was launched in February, aiming to constrain companies with excessive power and social influence.
Steele, a former employee of the Federal Reserve Bank of San Francisco, is now the head of the corporate and social initiative at Stanford Business School. He hoped that the Biden administration would look at potential solutions, but he acknowledged that the big three would fight back and that they would not give up.
The size of several large financial companies has raised new questions about the governance of American enterprises, the competitiveness of the economy, the concentration of political power and the stability of financial markets, Steele wrote in the report. Congress should impose co ownership restrictions to prevent holding large stakes in concentrated industries.
The Financial Stability Oversight Board may also take action. Mr Steele said the oversight committee should designate the platforms and hosting services of the big three as systemically important market utilities, a title that would make them subject to greater regulation by regulators. At the same time, Dodd Frank act should be amended to require the separation of systemically important basic business from other businesses.
However, it is not clear whether the U.S. government is interested in solving this problem. The Obama administrations efforts to limit asset management agencies were weakened by lobbying.
The new U.S. government is expected to focus on fighting the epidemic, rebuilding the economy and addressing climate issues. If Biden has antitrust efforts, it is likely to target large technology companies, not big asset management groups. However, the monopoly behavior of financial giants has begun to attract attention, just like the monopoly of technology giants, even if it will be late, it will not be absent.
Giant counterattack: will hurt investors
BlackRock said in a statement that the report had a number of factual inaccuracies and misunderstandings about the company and the industry.
BlackRock said it welcomed constructive discussions on the role of asset management companies and their impact on financial markets and society. BlackRock, however, is concerned that the recommendations called for in the document could hurt investors and businesses, as it overturns the value proposition of low-cost investment solutions and is detrimental to millions of investors who save for retirement and other financial goals.
State Street said in a statement that it fundamentally disagreed with the conclusions and recommendations of the report, believing that it would harm investors.
The tide of anti-monopoly is rising all over the world
At present, the world has been highly concerned about the monopoly of technology giants, and the explosive growth of Internet platforms also makes many governments feel uneasy and alert. The European Union announced an antitrust lawsuit against Amazon. The U.S. Department of justice also filed a lawsuit against the dominance of search engine giant Google.
Google, the US Justice Department said, is a monopoly gatekeeper on the Internet and has been taking measures for years to prevent others from gaining access to its dominant position, such as signing an exclusive agreement to prohibit the pre installation of any competitive search service. The U.S. antitrust case against Google is the largest antitrust lawsuit since the Microsoft monopoly case in the 1990s.
China has also formulated new rules for the monopoly platform economy. On November 10, the State Administration of market supervision of the peoples Republic of China issued the anti monopoly guidelines on the field of platform economy (Draft for comments). The public can give feedback on it before November 30. The new guidelines will prohibit Internet companies from sharing sensitive customer information, from jointly cracking down on competitors, from price cutting competition, and so on. The guide will also control each platform, use technical means to set prices automatically, and treat different customers according to their information and consumption habits. Internet giants such as Alibaba, ant group, Tencent and meituan are expected to be affected by the new guidelines. According to the State Administration of market supervision of China, the guideline is to prevent and stop monopoly behaviors in the field of platform economy, guide operators in the field of platform economy to operate in accordance with the law, and promote the sustainable and healthy development of online economy. Source: China fund daily Author: Yao Bo, editor in charge: Zhong Qiming_ NF5619
China has also formulated new rules for the monopoly platform economy. On November 10, the State Administration of market supervision of the peoples Republic of China issued the anti monopoly guidelines on the field of platform economy (Draft for comments). The public can give feedback on it before November 30.
According to the State Administration of market supervision of China, the guideline is to prevent and stop monopoly behaviors in the field of platform economy, guide operators in the field of platform economy to operate in accordance with the law, and promote the sustainable and healthy development of online economy.