There is this dialogue online that Blackrock and Vanguard and other asset managers etc are the bane of society and that they control everything. How do so many people not understand asset managers? Why are people suggesting that they are so scary…can someone explain
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Because your average person understands nothing and it's a seductive narrative
Further, ignorant people have a strong bias towards filling in complexities in science/finance/law/government that they cannot understand with cynical and overly simplistic conspiracy theories. It's kinda rare for someone to just admit they don't get how something works. Think of all the batshit baptists in Texas that lose their hats if you suggest the world wasn't created by some guy in the sky waving a magic wand.
What, specifically, is the BlackRock conspiracy theory? And how, specifically, is that "conspiracy theory" wrong? Specifically.
The conspiracy theory is that Blackrock and Vanguard are controlled unilaterally by a few elites who in turn control unilaterally nearly every public company in the US and they all work together to enforce the ~woke leftist agenda~
Other than potentially being overstated, how, exactly, is that allegation wrong? The senior management of these companies have openly stated they intend to use their vast influence to push social change in corporations. I'm not sure how this is a conspiracy theory.
Hey Assman!
+ a lot
And these days, Tiktok has become a fertile platform for people to complain about "capitalism," "inequality," and turn everything into a nepo- or race issue. As such, big money managers are an easy target.
Blackrock makes sense recently if you’re talking about their huge investment in residential housing.
Otherwise, a lot of these people hate a place like blackrock or vanguard for being a very large financial company or they don’t understand that being a large shareholder is not the same as owning the company. Yes, they really think these asset managers secretly own the companies.
But isnt there a point to the fact that each of these shares bear voting rights?
It's still down to the end individual to vote? Vanguard etc. serves just as a proxy for the end user (customers who buy Vanguard funds) to vote through. Vanguard doesn't outright own all the shares themselves and can't make the voting decisions themselves.
Do correct me if I'm wrong.
Blackrock doesn't buy single family homes...
Are you confusing Blackrock and Blackstone?
People love the narrative of the "corporations control everything" conspiracy theory, a theory which has been around longer than Vanguard or Blackrock have even existed.
If people actually knew to what capacity, especially Vanguard, operated in (their business model) -- I think they would pretty easily understand how this conspiracy couldn't be true. I'm leaning in to the fact that the people who unironically believe this conspiracy are too ignorant to actually understand how things work. They have the room temperature IQ to see a graphic of Vanguard and Blackrock logos with a bunch of arrows pointing to a bunch of blue chip companies and assume that means those companies control the other companies.
Just googled and posting the first result.
https://www.politico.com/newsletters/the-long-game/2021/07/20/blackrock….
I think the concern is with the amount of influence BlackRock, Vanguard, State Streets have in large companies and the risk of the asset managers holding and acting on agenda that is conflicting with the best interest of investors (holders of the ETFs). They are inherently indexers and aren't incentivized to exercise their voting rights in a way that would make the most return for their ETF holders...
These concerns surfaced with sane people questioning the actions of Target and Bud Light, why a management would torpedo its business for the sake of ESG/woke movement and tie that back to what Larry Fink said about ESG and how he views the companies should operate.
TBH, I'm not 100% up to date on this matter but I think the concern is legitimate to a certain extent.
How aren’t they incentivized to vote in a way that would maximize return?
Their ETFs merely have to replicate the index. I'm not in the indexing business so I might be in the wrong here but this is my assumption:
- Indexer work quantitatively to replicate the performance a said index with the least amount of holdings and turnover
So if the above is deemed to be satisfied by the indexer - however way they vote on the companies they hold aren't going to hamper their relative performance. For example, they vote for one company in a way that is not the best course of action for that company. Then the price of that stock goes down in the Index as well as their ETF...
let me know if I'm wrong.
Because Blackrock/Vanguard control a huge portion of the market, have stated that they intend to use that market power to punish companies that do not implement the social values specified by them, and have more than enough ability to make good on that threat.
The reason why people think this "conspiracy theory" is because they're openly, publicly, going around making veiled threats that anyone who does not comply with the desired social values that Blackrock wants will be punished in the capital markets.
To some extent the reason people think Blackrock has this much power is because Blackrock thinks they have this much power.
I certainly agree that "control the world" is a bit of an overstatement, but I think to say that it doesn't have any merit is a bit short sighted. Like obviously BlackRock didn't vote to use Dylan Mulvaney as a marketing strategy, but I think it could be argued that the initiatives pushed by BlackRock may have put the people who recommended the strategy in positions of power within the company.
In other words AnB and TGT were able to point the finger at a bogeyman to escape responsibility. No wonder they got to the top.
Sure there are some people with a notion that these large asset managers control the world which is overblown. But the truth is that these companies have an enormous influence on capital markets, corporate actions, and governance which can trickle down to society. BlackRock almost single-handily catalyzed the ESG movement which meaningfully impacted the strategies, operations, budgets, and marketing for thousands of corporations globally. There were a ton of second and third order impacts from this including at a societal level.
This isn’t a judgement on BLK, it’s the truth and brilliant play from a strategy perspective in creating demand for ESG products at the time. If you have trillions of dollars at work as a company, it’s inevitable that you exert your influence.
Good article that helps explain this: https://nypost.com/2023/09/16/everyday-investors-may-soon-vote-away-esg/
That article is wishful thinking lol. I do proxy advisory for large corporations, mostly oil and gas companies, and the claimed backlash from investors has yet to materialize. Anti-ESG ballot proposals barely cracked 1% median vote support across the board this year. I think the highest was 3% for any measure this year.
As to the claims about ESG being misaligned with profits and growth, the numbers don't lie: those with better ratings outperform peers. This is just an extension of the Chamber of Commerce and CEOs' and Boards' anger at having someone do basic oversight.
Edit: Blackrock, Vanguard, and State are essentially manipulating markets by artificially creating demand for their own trades which they foist onto their own proxies. They also gained through the intermediation of third parties who gathered rating agencies to act as officiates of ESG scores which are nothing more than subjective measures that suppose themselves to be of objective scientific measurement proving both gains for society and investors. Nothing about this shit makes any sense. Any person of true motivation can look at the organization of the ESG agenda and see problems legally, ethically, and intellectually as to the areas of concern they claim to want to resolve.
To reassert, this is the worlds biggest monopolistic market collusions we’ve ever seen. And as this monopoly grows, it erodes at the power of regulatory to reign them in. This is a perversion of capitalism that will ultimately build to greater levels of group think, concentrations of power, and a stifling of competitive forces.
If anybody would like to debate / discuss the logic and merits of the ESG agenda, please reply below.
I agree with you that some of the metrics used for assigning ESG scores are vague, strange, and not easily quantifiable, but for the most part it's largely about disclosures, eg: does the company disclose their risks to a cyber attack, fresh water use, policies on suppliers abiding to human trafficking/modern slavery laws?
I do proxy advisory and the reality is investors do care about this. ESG should really be understood more as a measure of the risks a company has for investors, especially on the Governance side of things. Things like have a classified board, unequal voting rights, bad audit policies all make a company more likely to fail; just look at Enron.
The E&S space is definitely more debatable, I have clients who question why certain things apply to them given their industry, but there isn't any "ESG Agenda". It's just shareholders trying to understand the companies they're invested in and making their voice heard.
Lets assume all of this is true. Why does it matter? The only possible complaint here is that you, specifically you, don't like ESG investing and thus have decided that the investment criteria that Vanguard prioritizes are "wrong". But that doesn't make any sense. All you are doing is superimposing your values onto these funds and deciding that if they deviate from what you think is moral, then somehow they aren't pursuing the best interests of their investors. Which is obviously bullshit - theoretically, Vanguard could probably make a better ROI funding drug smugglers, but they don't do that either! At some point, all of these funds have internal criteria to decide where to invest, and always have - you're only now upset because those criteria no longer dovetail with what you believe. Until you can prove beyond a shadow of a doubt that these large funds are deliberately foregoing returns in order to pursue an ESG agenda, you have no argument at all. I mean, hell, a third of ESG is "governance" - if you don't like ESG, you are actively advocating for investing in corrupt and inefficient companies!
"This isn't a judgement on BLK, it's the truth"
It's hard for ordinary people to understand this point. The mandate of a company is not to make anyone's life better / more enriched / act altruistically. It's a company's mandate to generate returns for the shareholders. Full stop. "Right or wrong" does not even enter the equation. Naturally BLK or Vanguard are not "evil" because they care about the net income and gross revenue, but when you deal with an entity or person who is self-interested, be prudent and tread at your own risk. This just seems to be lost on the majority.
BlackRock has something like $9 trillion of AUM. Its senior leadership is dedicated to using their influence on boards of directors and their market making power to influence political/social behavior of corporations. They have more power and influence than all elected representatives other than maybe the President and House and Senate leadership. This power is non-democratic and generally violates the fiduciary responsibility to investors. Many investors, however, have essentially no choice as they are union members and employees who have their retirement money placed into pension funds or retirement accounts at the selection of some faceless administrator. So, it's not only un-democratic, this power is also not the result of an actual free market.
You have to understand Redditors and other online midwits do not reflect really any sizable portion of society. These are the same people who wanted excessive COVID lockdowns, free money and low interest rates to go with it, and now blame the resulting inflation on corporate greed
There will always be losers in society. Now is no different than 2012 , 2002, 1992, etc. Trying to get through to them is a waste of breath, you are better off engaging in literally anything else
I get what you're saying, but it's not fair to pretend like some of the concerns people have are completely unfounded.
Quotes like the one in the link below where BlackRock CEO Larry Fink said he wants to "force behaviors" around DEI/ESG is at least mildly concerning tbh - especially to an American public that values their individual freedoms.
https://www.foxbusiness.com/politics/blackrock-ceo-slammed-force-behaviors-dei-initiatives
How is this any different than conservatives hiding behind religion as justification to take away peoples individual freedoms?
Conservatives claim to care the most about peoples individual freedoms yet are the ones that are hellbent on taking it away from others if they don’t agree with their choices. They’re no better than the corporations or politicians they despise and are ultimately the same person.
What religion forcefully made people associated to their religion and took the individual freedoms away? And how did they do that exactly?
- Look at this extremely scary thing
- How is that any different than this other thing we were talking about? (That I said wasn't scary)
- Don't you feel dumb
That's how I read your comment
Honestly dude, I work at Vanguard and trust me, Old Tim Buckley & Mike Rollings are not paying me “controlling the world” wages. Most people here are not ambitious enough to come to the office 3 days a week let alone exercise control over the corps of the world.
As far as proxy votes go, mutual fund investors are eventually going to have a say. IIRC there have been a few funds piloted with this ability. For now proxy votes made on behalf of investors are made in good faith as a fiduciary duty to investors.
I don't think their ambition is to control the world. I think it's to make themselves popular at cocktail parties with progressive elites. If "control the world" is the conspiracy theory, then it's a distinction without a difference. Whatever their intention, their destination to that goal is to control how people behave without the public having democratic control via voting or free markets.
Not to mention the fact that if Blackrock kisses the asses of the progressive administrative state, then guess who gets the contract to do all the bond buying and make millions the next time the fed needs an asset manager / trading desk to carry out the next inevitable quantitive easing program.
Just because you don't get paid that much doesn't mean nobody does.
You and I have both worked in finance enough to know that it's kinda,sorta, a pyramid scheme as far as promotions go. That's why the up or out HR practices exist. A small number of Partners keep most of the money generated.
Because people in this country especially have always feared, and been suspicious of, vast agglomerations of wealth and the power that gives to the people holding it. Also, people are stupid and self-centered and are always the hero of their own story - if they aren't getting ahead, then someone must be keeping them down, and faceless corporate entities controlling trillions of dollars of wealth are a convenient scapegoat.
More to the point, irrational beliefs are part of being human. It's how Wall Street bankers justify their paychecks, despite doing very little of value and taking almost no risk. It's why people, some very smart, think that 3 hours of Google searching about vaccines makes them equally qualified to comment on their efficacy as a trained virologist or epidemiologist. It's why dozens of people on this site replied to the climate change thread by saying "every expert opinion out there is wrong, there is a vast conspiracy to silence dissenters and in any case the reams of data and solid consensus of the scientific community is wrong because it would be inconvenient for me if they were right".
People have an infinite capacity for self-delusion, and when our emotions don't correspond with reality, it's easier to craft some conspiracy theory that justifies those emotions than to admit that we are flawed.
Also - books like Caesars Palace Coup (depicts in detail the Caesars Palace casinos LBO) depict how firms like Apollo leverage their resources to effect legislation in their favor, get out of contracts, and screw over lenders, so there may be sone truth to it
Employees at Vanguard don't get paid enough to pull off those kinds of things.
Just because you don't see it as a junior doesn't mean it doesn't happen. I've had the fortune to have a seat at the (digital) table while a group of experienced industry executives were discussing what lobbying efforts it takes to break into a market and what investments you have to make.
If we're going to go by anecdotes, my anecdote is that it does happen.
Yeah, but on the other hand, so do unions. So do all sorts of special interest groups. Big business has no monopoly on manipulating government to get what it wants.
Cs ppl don’t know what AM do lmao also valid concern got turned into fearmongering
This is 100% happening. They use our retirement funds to control everything that happens in the marketplace. Removes the invisible hand, they are the hand now. They have the power to push the markets in ways they think are best, however they want to define that.
We just have to assume that they have great intentions, are good people, and won’t ever be corrupted by the massive amount of power this gives them.
I think smart people understand the potential consequences of this structure.
Meanwhile, many people on this thread are throwing this whole conversation out the window using buzzwords like Qanon and Illuminati.
Think first
It is with things like that that "smart" people really struggle to comprehend. They tend to look at things like this and see all of the things that would make it slightly more difficult to do, but tend to overlook the absolutely massive reasons why people would.
How can a passive investment manager who will get sued for deviating from the S&P 500 or whatever index they are supposed to track control everything in the market?
Well it honestly isn't an entirely unfounded fear. The heads of these orgs basically have carte blanche to impose what ever ideas they want on their portfolio companies. I mean have you ever read a TOS or TOU for using them as an asset manager? You basically give up any and all rights other than being able to access your money down the line IF it doesn't upset their business. It is pretty wild honestly.
Example: ESG
It comes in two flavors:
1. Morons who don't understand passive management and think that BlackRock and Vanguard are actively managing the companies in their portfolio.
2. Structural limitations of passive investment. First of all passive management is always going to favor big firms. There is no reason to invest in a smaller firm who provides a fund tracking the S&P when State Street offers one with an expense ratio of 0.02%. Second off, these firms are often the largest shareholders in fossil fuels, weaponry, companies with human rights issues, etc. and they will get blamed if they take action and they'll get blamed if they don't.
BlackRock / Blackstone are low key buying up all the houses so no one can afford anything anymore so that part of its totally justified in my opinion
https://www.blackrock.com/us/individual/insights/buying-houses-facts
BlackRock isn't buying houses, that's Blackstone.
https://www.blackstone.com/housing/our-track-record-in-housing/
And Blackstone ownership as a proportion of the total housing stock is tiny
Blackstone and BlackRock are both owners of Invitation Homes one of the big REITs doing this.
They like to say they only own .05% or something of overall housing stock, but it's a much, much higher proportion of "homes sold each year" particularly in Sunbelt areas where real estate is especially desirable. I live in a Southern city and they own a quarter of the houses on my block. Something like 20% of homes sold are to investors in cities like Atlanta.
https://www.ajc.com/american-dream/investor-owned-houses-atlanta/
A modest suggestion, the SEC should require that the ultimate beneficial owner gets the proxy vote. The other thing is holding boards to their fiduciary standard, there are way too many shitty, grossly overcompensated execs floating around.
The SEC requiring the beneficial owner to vote would be bad for board accountability. Do you think retail investors who own ETFs would be capable of filing thousands of votes on the underlying companies? Do you think a retail investor would be able to provide any level of scrutiny?
Some funds are enabling pass through as technology makes that a possibility. But requiring it would not be a good outcome for board accountability.
You could always incorporate language, whereby if the retail voter doesn’t vote their shares, the asset manager would get the proxy by default. I think that there has been limited board oversight for a long time, barring the handful of occasions where an activist comes in. In terms of retail investors, I think some of them would have both an interest and an aptitude when it comes to companies in industries they’re either interested or knowledgeable about.
My big concern with boards currently is that there has been a return to the imperial executive and a worsening of the principal agent problem. Many execs think in terms of quarter to quarter as opposed to over the longer sweep of time, and hence skimp on things like research and development if it means missing quarterly earnings. I also think a lot of executives are grossly overcompensated relative to the value they provide.
Was worried about the same thing - a lot of Russian misinformation out there. Can some of you front office guys debunk the “documentary” from the below link?
https://www.corbettreport.com/blackrock
Nothing is worse than the intersectionality of white supremacy, anti science, and the Anti-ESG agenda from the Trumpist insurrectionists. It’s repugnant!
This article is drivel....at no point does it even mention that AUM =/= firm money. It even conflates 'Aladdin AUM' as being controlled by BlackRock.
It is complete drivel, the maker is a known conspiracist who deals in far right anti science narratives and doesn’t believe the “official story” of 9/11 even though there is a scientific consensus there. Click around his site for a good laugh at how stupid people can be.
James Corbett is uneducated and out of his depth when dealing with finance which is highly complex and something better left to experts (you wouldn’t try to work on your own car without a mechanic, I don’t understand why someone would try to understand asset management without a university degree in it).
What else is inaccurate in the video? I hate seeing this type of disinformation circulate so I want to know how to properly debunk.
It is interesting considering that Jack Bogle did more than probably anyone else in democratizing access to financial products for the average American.
It's kinda funny that certain posters on this forum are okay with crony capitalism and act like any criticism of it must be a far-right conspiracy theory when all I hear from the left is how corporations are ruining this country.
Touche. I believe that people just feel like they don't have any control anymore and are just pointing fingers where they can.
Its very simple. Larry Fink says he wants to force behaviors along his sense of morality. I disagree with his sense of morality, and consider it a social cancer. So therefore I am against Blackrock and any other large organization with those values. It's not a "conspiracy theory" when they outright admit that.
"B-b-but conservatives force morality too!!". Yeah, so what? I don't believe in moral relativism. I believe that my beliefs are superior to other people's beliefs - that's why I chose my particular views over all other possible views. If you consider all beliefs equal, then what's the point of having them?
So I consider Blackrock an enemy and will do everything I can within my, albeit limited, power to injure them. This includes slandering them and spreading what you consider to be "conspiracy theories". I don't really care lmao.
Far easier to blame something than learn about the entire system and how there's nuance to everything and everyone has a boss
Would recommend a newly released book by Harvard Law professor John Coates “The Problem of Twelve”. It analyzes this exact situation and outlines some of the problematic trends when a few elite, powerful organizations have the ability to exercise direct influence over a majority of other corporations and the gov’t.
Not necessarily suggesting what Coates outlined is absolute truth, but it’s a short read (200 pages) and hopefully adds some context for those trying to better understand the BlackRock/Vanguard rhetoric.
The perception that asset managers like Blackrock and Vanguard control everything and are seen as the "bane of society" may stem from concerns about their size and influence, potential conflicts of interest, and the impact of their investment decisions. However, it's important to recognize that asset managers operate within the framework of financial markets and regulations, and their influence is not absolute. Factors such as government policies and market forces also shape outcomes. It's vital to have a nuanced understanding of their role and consider the broader context of market dynamics and regulations.
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