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Hmm, two apparent ones come to mind: - Concentration of ‘voting power’: if more investors flock to index funds, a smaller group of fund managers will have m
by dannyphantom 3y ago
Hmm, two apparent ones come to mind:
- Concentration of ‘voting power’:
if more investors flock to index funds, a smaller group of fund managers will have more voting power on behalf of their clients.
Theoretically, a ‘concentration of power’ could give [few] fund managers a lot more responsibility than they should otherwise have; that’s a lot of livelihoods to hold be responsible for.
- Increased crorrelation:
if a [large enough] portion of the population invests in index funds, the returns of those funds will become more correlated with each other; a ripple could become a tsunami.
- chii 3y ago> fund managers a lot more responsibility than they should otherwise have; that’s a lot of livelihoods to hold be responsible for. what are these livelihoods? They should be voting in the financial interest of the clients that own the index, which sounds fine to me.
- rcme 3y agoThe concentration of voting power is an issue, but not because of the "increased responsibility." Large funds like Vanguard and BlackRock end up owning huge portions of many different companies. These companies are often direct competitors with one another, e.g. Vanguard owns over $62 million in American Airlines and $136 million in United. This creates incentives for anti-competitive practices.