Process
Status Items Output None Questions None Claims None Highlights Done See section below
Document Notes
Basic features of the new finance capital that impact corporate governance.
Highlights
id882938764
BlackRock. By the end of 2024, this single firm possessed 26 trillion.
id882938759
“alternative asset managers” have also grown at a rapid clip in recent decades. Alternative asset management is a broad category that includes private equity, real estate investment, hedge funds, and more. Blackstone, the largest alternative asset manager, now oversees more than $1 trillion.
id882939306
the threat of being acquired by alternative asset managers like private equity firms has enforced discipline on corporations. This, in turn, reinforces the power of shareholders, including the Big Three.
id882939381
BlackRock has engaged in a series of acquisitions (Global Infrastructure Partners, HPS Investment Partners, and Preqin) and has even attempted to purchase the firm that operates the Panama Canal. To the extent that this represents an intention among the Big Three to expand beyond publicly traded markets and to establish a greater presence in alternative asset management, their power may well grow still further.
id882939447
First, for certain asset managers, “exit” from any given company that they are invested in is not an option. In the past, investors dissatisfied with the performance of a company simply sold or threatened to sell their shares. The Big Three do not have that luxury. Given the scale of their positions, dumping shares would have adverse effects on the entire market; this, in turn, would hurt their overall portfolios. Among the key products they offer investors are cross-market index funds, which by design include just about every company.
✏️ They’ve grown so big, and their influence is so massive, that they can’t dump a stock without upending the whole market. 🔗 View Highlight
id882939482
Second, for the Big Three, their index funds — mutual funds and exchange traded funds (ETFs), which provide investors with access to the entire market in one swoop — are part of a “passive investment strategy” among asset managers. These firms do not actively try to “beat the market” or bet on winners and against losers. Instead, they are committed to holding the widest range of assets for the long run.
id882939509
Finally, both of these previous points result from the status of the Big Three as “universal owners,” meaning they almost literally own a bit of everything. Because of their exposure to the entire publicly traded market, and because they operate on a fee-based model, asset managers have an interest in seeing share prices continually appreciate in value. For them, the function of the stock market is not to raise capital that specific businesses can use to expand investments in their companies. Rather, it is simply to enlarge the wealth of investors.
✏️ Simply put, buying stocks is not about raising capital to expand on investments, but rather about enlarging the wealth of investors. This shift in perception and functionality is key in understanding why decisions are made the way they are. They don’t care about investing to improve services to make more money that way… they just want the wealth to grow with as minimal time and effort as possible. Min-Max to the extreme. 🔗 View Highlight
id882939754
There is no easy way out of this mess other than breaking the cycle that got us here in the first place.