Opportunism in the Shareholder Voting and Engagement of the ‘Big Three’ Investment Advisers to Index Funds

Abstract

The Big Three investment advisers to index funds (BlackRock, Vanguard, and State Street) need to be understood as agents of those who invest in the mutual funds and exchange traded funds they manage. They are not institutional investors, the role performed by the funds they manage, but investment advisers. As such, they are agents, prone to acts of opportunism like any other agent. Corrective measures are required to discourage their opportunistic behavior. To mitigate such behavior, this Article proposes both a market solution and the use of fiduciary duties.

Keywords: investment advisers, shareholder voting, empty voting, opportunism, Big Three, index funds, mutual funds, ETFs

JEL Classification: G34, G38, K22