The New Permanent Universal Owners: Index Funds, (Im)patient Capital, and the Claim of Long-termism

30 Pages Posted: 7 Feb 2019

See all articles by Jan Fichtner

Jan Fichtner

University of Amsterdam / CORPNET

Eelke M. Heemskerk

University of Amsterdam / CORPNET

Date Written: November 13, 2018

Abstract

Fundamental change is happening in asset management – the shift from actively managed funds to index funds. This money mass migration into index funds has far-reaching consequences, because it leads to a concentration of corporate ownership in the hands of the ‘Big Three’ asset managers. We call BlackRock, Vanguard, and State Street the ‘New Permanent Universal Owners’ as they are invested indefinitely in thousands of member firms of stock indexes. We provide novel findings on the combined ownership of the Big Three in 17 major stock indexes from nine countries. Furthermore, we shed light on the impact of index funds on the dichotomy between ‘patient’ and ‘impatient’ capital. The Big Three have proclaimed themselves champions of long-termism. We analyze their voting behavior in five countries concerning two proxies for corporate short-termism: share buybacks, and mergers and acquisitions. So far, they have not unambiguously acted as champions of long-termism.

Keywords: Asset managers, index funds, corporate ownership, corporate governance, short-termism, varieties of capitalism

JEL Classification: G23, G32, P10

Suggested Citation

Fichtner, Jan and Heemskerk, Eelke M., The New Permanent Universal Owners: Index Funds, (Im)patient Capital, and the Claim of Long-termism (November 13, 2018). Available at SSRN: https://ssrn.com/abstract=3321597 or http://dx.doi.org/10.2139/ssrn.3321597

Jan Fichtner (Contact Author)

University of Amsterdam / CORPNET ( email )

Nieuwe Achtergracht 166
Amsterdam, 1018 WV
Netherlands

HOME PAGE: http://www.jfichtner.net

Eelke M. Heemskerk

University of Amsterdam / CORPNET ( email )

PO BOX 15578
Amsterdam, 1001NB
Netherlands
+31 (0)20 525 2628 (Phone)

HOME PAGE: http://www.eelkeheemskerk.nl

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