Asset management firms invest in everything from the stock market to housing, and as a result they now oversee over 26% of global private wealth. The 'Big Three' firms now manage over $23 trillion in assets - a number close to the GDP of the US. But, argues A.G. (writing under a pseudonym while she investigates the firms), these companies' size and influence encourages anti-competitive behaviour and prioritises short-term profits over broader economic health. This has led to wage stagnation and increased wealth concentration among the rich. We need alternative approaches. A democratically controlled public asset management firm could help us to achieve more equitable and sustainable prosperity.

Our lives have become increasingly intertwined with global financial markets. If you have a retirement plan or a personal investment account, chances are your savings are being managed by asset management companies. By managing investments on our behalf, asset management firms not only command the flow of global capital, but they also exert control over the companies where we work, own the houses and apartments where we live, administer infrastructure services on which we all rely, and influence our countries’ monetary and climate change policies. Despite promising to make investing more accessible, this new financial regime has failed to bring about a more equitable and democratic ownership of capital, with an ever smaller group owning increasingly more of our societies. As asset management firms continue to prioritise short-term capital growth above all else, we are left to deal with the fallout from their investment behaviour, including stagnating wages, a cost of living crisis, crumbling infrastructure, and a burning planet.

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The asset management industry oversees $119 trillion worth of assets globally, accounting for 26% of global private wealth.

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While the level of asset managers’ involvement varies greatly depending on asset type and the fund’s investment approach, asset managers have acquired an unparalleled ability to directly impact the lives of millions of people, all while operating largely out of the public eye with little regulatory oversight. The asset management industry oversees $119 trillion worth of assets globally, accounting for 26% of global private wealth, spanning investments in the equity of publicly traded and privately held firms, corporate and sovereign bonds, real estate, infrastructure, and commodities. The United States alone accounts for over half of these holdings.

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US publicly traded firms and being the largest shareholder in 88% of the S&P 500 firms.

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The asset management industry is highly concentrated. The three largest firms (BlackRock, Vanguard, and State Street), frequently referred to as the ‘Big Three’, own 17% of the US stock market and manage assets worth $23 trillion (almost the size of the GDP of the United States). The Big Three are largely passive investors, with a significant share of their investments held in index funds, which track various stock market indices such as the S&P 500. Because of their passive investment approach, they have become universal owners, holding investments in almost all US publicly traded firms and being the largest shareholder in 88% of the S&P 500 firms. Outside of the United States, they hold investments in 20% of non-US listed firms and own 4% of non-US equity.

The ascent of asset management firms as the largest shareholders of publicly traded companies is a relatively new phenomenon. In the post-World War II era, 95% of US corporate equities were directly owned by households (see Figure 1). With the rise of private pension funds throughout the 1970s and the 1980s, the share of stocks directly held by US households began to rapidly drop.