called Vanguard, Black Rock and State Street Global Advisor and they are the
world’s 3 largest mutual funds. They are also known as asset managers or
investment funds, operated by professional experts who collect
“fresh” money from an immense and varied number of investors and
savers. With this “fresh money” they buy securities in the various
stock exchanges of the planet and redistribute profits (when things go well) to
those who have entrusted them with the surplus of their capital and/or savings.
Investors can be of a commercial or institutional nature, but also simple
private individuals who access the various investment plans attributable to and
controlled by the Big 3.
appear closely interconnected with each other, thanks to proprietary
intersections and extremely confidential and personal links among their
representatives at the head of operations and the respective boards of
when we speak of “financial capitalism”, of “neoliberal
imperialism”, or when we evoke “finance” tout court, we speak of
or rather “evoke” them as a compass for guide the destinies of
today’s world and the future without mentioning them. Like any true power, they
are already taboo.
The 3 are at
the centre of a vast galaxy of acronyms, in which other important mutual funds
and financial entities appear (including Fidelity, T-Rowe, Goldman Sachs,
JPMorgan and Morgan Stanley). The financial masses managed by them act as
within a gravitational system, causing attractions and repulsions on the entire
constellation of banking and insurance. Thanks to strategic positions in the
various shareholdings, made up of their monumental investments, the Big 3 are
able to “condition” the direction of each area of activity:
production, distribution of goods and services, transport, healthcare,
that, in the last 12 years, 3 massive new planets have grown dramatically, in a
planetary system, dynamic but fundamentally balanced, and have assumed a
central position in the system, thus determining new balances and imbalances
and new orbits of all the previous planets and satellites that were present in
obviously enjoy maximum respect, but they really scare all those who – rightly
– fear the verticalisation of power.
As early as
2017, Jan Fichtner, Eelke M. Heemskerk and Javier Garcia, three researchers
from the University of Amsterdam, explained that: “Since 2008, a massive
shift has occurred from active toward passive investment strategies (see below,
ed.). The passive index funds sector is dominated by the ‘Big Three’. We have
comprehensively mapped ownership of the Big Three in the United States and
found that together they make up the largest shareholder in 88% of the 500 companies
in the S&P index.”
words, this means that the Big Three are the largest shareholder in almost 90%
of the companies in which most people invest. To give an idea, the S&P 500
lists both old giants of the ‘old economy’ (such as ExxonMobil, General
Electric, Coca-Cola, Johnson & Johnson and JP Morgan) and all the new
giants of the ‘digital age’ (Alphabet-Google, Amazon, Facebook, Microsoft and
Apple). This means that their influence also extends to the major vehicles of
information and e-commerce.
exceptional findings. If – as seems – they correspond to reality, the scenario
that appears contravenes any previous vision of free competition and describes
a dominant position that had never been achieved in history.
an analysis of proxy vote records,” continue the Amsterdam professors,
“we find that the Big Three do utilise coordinated voting strategies and
hence follow a centralised corporate governance strategy. They generally vote
with management, except at director (re-)elections. Moreover, the Big Three may
exert ‘hidden power’ through two channels: first, via private engagements with
management of invested companies; and second, because company executives could
be inclined to internalising the objectives of the Big Three.”
recently claimed that it is not legally the “owner” of the shares it
holds. “We are rather the custodians of money entrusted to us by
investors,” they said.
This is a
technicality to be interpreted: what is undeniable is that the Big Three exercise
the voting rights associated with these shares. Therefore, they must be
perceived as de facto owners by corporate executives. It is easy “to be
prone” when your post and your millionaire liquidation depends on who is
“custodian” of the controlling share package of the company you work
As long as
the accusing finger was pointed by the Europeans – and notwithstanding the
concerns of the EU Antitrust Commission – the scene in the USA was minimised
and the risks associated with it were underestimated. However, the US Antitrust
and Justice Department woke up last year. The real reasons for the new state of
alert are obviously political and attributable to the power structures in and
around the White House. Officially, the authorities showed concern because
among those putting the Big Three under the magnifying glass appeared the
Harvard Law School. From their prestigious benches, Lucian Bebchulk and Scott
Hirst, two academics considered among the top experts in corporate governance,
produced an alarming study called “The Specter of the Giant Three”.
figures at hand, it is shown that the 3 alone manage 16 trillion dollars (in
2019) and that in this way they find themselves controlling 4 out of 10 shares
of the major US corporations.
by Vincenzo Beltrami on Startmagazine: “The Harvard paper has the merit of
photographing the exponential growth that especially BlackRock and Vanguard
will have in the coming years in the financial structures known to date,
triggering a change of global paradigm of which it is already today possible to
predict the effects. The Harvard academics have calculated that the masses
managed by these giants, with the relative power of representation that derives
from them, are destined to increase respectively by 34% in the next ten years
and by 41% calculating a period of twenty years.”
Now let us
look at some “details” published on Wikipedia:
Vanguard Group is based in Malvern, a suburb of Philadelphia, Pennsylvania.
Founded in 1975 by John C. Bogle, it manages 6.2 trillion dollars in assets and
has approximately 17,000 employees. The current CEO is Mortimer J. Buckley.
is based in New York. It manages a total of 7.5 trillion dollars in assets, of
which one-third invested in Europe and 500 billion in Italy alone. It was
founded in 1988 by Laurence D. Fink (CEO), Susan Wagner and Robert S. Kapito.
It has 15,000 employees
Street Global Advisors is the investment management division of State Street
Corporation. It manages around 3 trillion dollars. It is based in Boston,
Massachusetts. The CEO is Cyrus Taraporevala. It has 2500 employees.
confirm that the total assets managed by the Big 3 amounted to 16 trillion
dollars in 2019. Now the question is: if the funds are equal to 4 times the
German GDP or, if you like, 8 times the Italian public debt … what is the
vision of the future of who manages it?
all, going back to the projections of the Harvard academics, if you exceed 20
trillion in 2030 and fly towards 30 trillion in 2040, then the funds will be
equal to half the GDP of the entire planet Earth.
all the employees of the Big Three, equal to 35,000 people, how is possible to
manage a similar financial mass that is equivalent to that produced by half the
population, or 3.5 billion humans? Something serious is going on. Antitrust
authorities are therefore right (but are they able to intervene?). If there is
one, where is the catch?
gives us a first “technical” answer from the columns of Sole 24 Ore.
“It should be clarified that the main driver of growth is represented by
passive management: that is, by ETFs, destined to reach 25 thousand billion dollars
in assets managed within the next seven years according to estimates by Jim
Ross, president of State Street”.
exchange-traded funds, are a type of investment funds belonging to ETPs (Exchange Traded
Products), or to the macro family of listed index products, with the aim of
replicating a reference index (benchmark) with minimal interventions. Unlike mutual investment funds and SICAVs, they have passive management, are released
from the manager’s ability and are listed on the stock exchange in the same way as shares and bonds.
management means that their return is linked to the listing of a stock exchange
index (which can be equity, commodity, bond, monetary, etc.) and not to the
fund manager’s ability to buy and sell. The manager’s work is limited to
verifying the consistency of the fund with the reference index (which may vary
due to company acquisitions, bankruptcies, collapses of quotations, etc.), as
well as correcting its value in the event of deviations between the fund’s
quotation and that of the reference index, which are allowed to the order of a
few percentage points (1% or 2%).
management” makes these funds very economical, with management costs
usually lower than the percentage point, and therefore competitive with respect
to active funds. Their large or huge diversification,
combined with stock exchange trading, makes them competitive with respect to
investment in single stocks. And there you have it!
also be called “financial clones” because they faithfully mimic the
performance of a particular index.
Marro continues: “There now exist ‘clones’ of all kinds, from those
related to pink quotas to those following the Bible, from those that invest by
listening to Twitter to those guided by artificial intelligence or that focus
on therapeutic marijuana. Not to mention the ETFs that follow sophisticated
“smart beta” strategies, more or less countercurrent, sometimes
extravagant. All that’s missing is a “clone” on Bitcoin, nipped in
the bud by US regulators for obvious reasons of financial stability and common
like to add some macro financial policy considerations to this technical
explanation. Before the stock market boom, and in detail before the start of
Nasdaq, which replaced “human” buying and selling with digital buying
and selling managed by algorithms, exchange value (financial capitalisation)
was strongly correlated with use value (produced by the real economy).
Simplifying, it can be said that material wealth (GDP) had a reasonable
counterpoint in the wealth dealt with in stock exchanges. With the advent of
Nasdaq and the first placement on the stock exchange of “all digital”
companies, finance begins a path of numerical virtualisation, favoured by digital
exchanges that take place in a space-time where speed and volumes tend to
infinity while times of access and exchange tend to zero. In this new
“numerical-financial dimension”, the production of exchange value is
exalted and its volume grows exponentially, “untying itself” from the
material counterpoint (the real economy). This has allowed speculators to have
access to the production and management of endless financial masses, which are
created continuously thanks simply to the multiplication of “exchanges”
and have nothing to do with the real material economy. So much so that it is
now known that for each dollar or euro corresponding to use value (real
economy) there is a slightly higher equivalent value in circulation on the
stock exchanges (according to the IMF). XXXX According to other sources,
however, the value of market capitalisation would be 4 to 8 times higher than
that of planetary GDP.
another explanation – quite disconcerting – of why 35,000 employees manage a
value equivalent to what is produced by 3.5 billion humans.
look at the scene from the point of view of regulations:
In 1933 in
the USA, the Banking Act was incorporated into the wider Glass-Steagall Act. It was the response to the financial crisis of
1929, aimed at introducing measures to contain speculation by financial intermediaries and prevent situations of banking
panic. The measures included the introduction of a clear separation between
traditional banking and investment banking. Under the law, the two activities could no
longer be exercised by the same intermediary, thus creating the separation
between commercial banks and investment banks. The real economy was in fact prevented from
being directly exposed to the influence of finance. Due to its subsequent
repeal in 1999, precisely the opposite happened in the 2007 crisis: insolvency in the subprime mortgage market, which began in 2006, triggered a
liquidity crisis that immediately spread to traditional banking, because the
latter was mixed with investment activity.
effects of the repeal, the creation of banking groups was permitted which,
within them, allow, albeit with some limitations, the exercise of both
traditional banking activity and insurance and investment banking activity.
After the new Great Recession of 2008, during the Obama presidency, attempts were made to at least
partially restore the Glass-Steagall Act with the Dodd-Frank Act. In reality the stable door had opened and the
horses had already all bolted. Today some observers believe that the triumphal
march of mutual funds was made possible precisely by repeal of the
And in fact
the extent of the change is surprising: from 2007 to 2016, actively managed
funds recorded outflows of approximately 1,200 billion US dollars, while index
funds had inflows of over 1,400 billion US
We now come
to historical-philosophical considerations-conclusions concerning the
collective behaviour of the human species. Following the Great Revolutions, the
idea of equality spread and rights, in some seasons, appeared better than
interests. This referred to the idea of distribution of wealth, to be pursued
thanks to bargaining between the labour force and capital. It was an action
that was proclaimed with the hypothesis that the means of production should
belong to those who actually produced wealth and not to the masters of capital.
Notwithstanding the many civil and political battles, with the unconditional
surrender of the USSR and the decline of socialist and communist ideas,
capitalism and its substitutes have won the arm wrestling with the working and
peasant masses and with the class of intellectuals who supported them. The
elites imposed a neoliberalism that is based no longer and not only on the
hegemony deriving from the accumulation of surplus value obtained from the
production of goods, but on a series of new sources of income, among which – as
described – the uncontrolled production of exchange value on stock exchanges.
is where the choice has been made by the world population in the last 30 years:
is it better to struggle to own the means and infrastructure of production or
is it better to try to participate in the profits that the neoliberal system
produces on the stock exchange?
disadvantageous gap between the volumes of the real economy and those of
numerical finance, having regard to the respective tax rates that favour
finance, together with political propaganda, the seduction of advertising and
the induction of lifestyles favourable to individualist liberalism, the choice
is increasingly turning towards the second option. And so the Anglo-American
neoliberal weltanschaung, characterised by the acceptance of the
“gamble” outpoints visions characterised by the search for
“certainties”. Right now tens (perhaps hundreds) of millions of
savers and millions of small and medium-sized companies are not re-investing
their savings and capital surpluses in productive structures and only a small
minority imagines generating work for themselves and for their
“equals”. They are not even thinking of it! As soon as there are some
savings, a severance indemnity, a hereditary bequest or an immobilised capital,
the overwhelming majority look for “a short way” to make it bear
fruit, or the best way to invest it to derive profits and position without
tiring and worrying about “the next guy”.
figure: according to a Morningstar analysis reported by the Financial Times, in
2018, BlackRock and Vanguard alone collected 57% of what flowed globally in the
varied panorama of mutual funds.
that in the eternal swing between individualism and collective solidarity, the
pole that represents immediate and measurable personal interests is leading the
game on a ground that has totally escaped the control of supportive humanism.
to the issue of mutual funds and conclude: many believe that everything is
legitimate and that their success is determined by historical circumstances and
knowledge that is high and above the average of mass capabilities. But we know
that behind this image of efficiency lurk very opaque and ambiguous practices.
Practices that could even allow, given the enormous amounts of money involved,
the buying not only of company managers but also of the governments and
oppositions in democracies. Let’s take this into account.
*Italian professional journalist and writer, Bachelor of Mass Communication Sociology. For 20 years he has been a correspondent and media editor for the newspaper La Repubblica, then 15 years in the Italian Radio Television (Rai) where he was responsible for relations with the foreign press and for the promotion and technological development of Rai International.