The “Big Three”

Since 2008, a massive shift has occurred from active toward passive investment strategies. The passive index fund industry is dominated by BlackRock, Vanguard, and State Street, (called the “Big Three”) who together constitute the largest shareholder in 88 percent of the S&P 500 firms.[1] In 2020 the Big Three managed $15 trillion in combined assets in the US, equivalent to more than three-quarters the size of the US economy.[2] By 2022 this had risen to $22 trillion in managed assets is the equivalent of more than half of the combined value of all shares for companies in the S&P 500 (about $38 trillion). Their power is expected to grow. An analysis published in the Boston University Law Review in 2019 estimated that the Big Three could control as much as 40 percent of shareholder votes in the S&P 500 within two decades.[3] In an article titled “Hidden power of the Big Three? Passive index funds, re-concentration of corporate ownership, and new financial risk” the authors suggest that the Big Three explicitly state that they want to be active shareholders and “together, they are a force to be reckoned with” and “the Big Three have the potential to cause significant change to the political economy of the United States”.[4] Another analysis in March 2023 states that it is impossible to know how these asset managers vote with respect to vast amounts of the equities that they manage. “Focusing only on mutual the available voting data therefore vastly understates the corporate governance might that they wield and may lead to inaccurate conclusions”.[5]

As of February 2023, the total value of assets under management (AUM) held by the Four asset managers — BlackRock, Vanguard, Fidelity, and State Street was over $23.8 trillion.[6] That compares with the GDP of the entire United States ($25.46 trillion) and is larger than the second highest country, China ($17.96 trillion) according to the World Bank in 2022[7]. Vivek Ramaswamy, a 2024 GOP presidential candidate, speaking in Des Moines, Iowa on July 28, 2023, described BlackRock, State Street, and Vanguard as "the most powerful cartel in human history". [8]

But the “Big Three” itself has a lot of cross-ownership and perhaps should be called the “Big Two” (BlackRock and Vanguard). BlackRock and Vanguard are two of the Big three passive fund asset management firms. The third, State Street, is owned by BlackRock - whose largest shareholder is Vanguard. It seems all roads lead to BlackRock.[9] Bloomberg calls BlackRock “The fourth branch of government”, because it’s the only private agency that closely works with the central banks. It also has $36 billion invested in military weapons’ companies. It is a top beneficial owner of Lockheed Martin (6.4%), Boeing (5.2%), General Dynamics (3.94%), Northrop Grumman (5.5%), and Raytheon (6.6%). BlackRock executives and governors also have interlocking roles with these defence manufacturers. For example, Boeing director Stayce D. Harris is also a director of BlackRock’s Fixed Income Mutual Funds.[10] BlackRock also owns a $5.5b “defence fund” (iShares U.S. Aerospace & Defense ETF) which seeks to track the investment results of an index composed of U.S. equities in the aerospace and defence sector.[11]

BlackRock’s Assets under management (AUM) have seen exponential growth historically. The chart below shows Total AUM of BlackRock from 2008 only to 2nd quarter 2022 (in trillion U.S. dollars):

Vanguard’s Assets under management (AUM) have also seen exponential historical growth. The chart below shows AUM of Vanguard in 1975, 1990, 2005 and 2022 (in billion U.S. dollars):

As an aside, amongst BlackRock’s current appointed Board of Directors is Amin Nasser, the chief of the world's largest oil company Saudi Aramco having produced 13.6 million barrels of oil equivalent per day last year.[12] This is especially interesting given the close ties between Saudi Arabia and China which includes increased nuclear cooperation.[13] [14]

If major asset managers such as the Big Three possess influence over how Governments are spending taxpayers’ money, why have observers not been more aware of the fact? Bruce Flatt, the head of Brookfield Asset Management, one of the leading players in real-asset investment, has provided perhaps the best explanation. “We’re in the business of owning the backbone of the global economy. [But] what we do is behind the scenes,” he told the Financial Times. “Nobody knows we’re there.”[15]

How Big is the Big Three?

To get a sense of the level of influence that the Big Three can wield, I examined the shareholding of the companies mainly responsible for the top 10 richest people in the world. Here's what I found:

Ok, so what about the shareholdings of the top 10 biggest companies in the world (by market capitalization)? Unsurprisingly, perhaps, the same names keep popping up:

The Big Three are not shy about using this voting power both directly and indirectly. On the

pretext of “investment stewardship,” (See BLACKROCK INVESTMENT STEWARDSHIP: ENGAGEMENT PRIORITIES (Feb. 2022); Vanguard, INVESTMENT

STEWARDSHIP: ABOUT OUR PROGRAM (2021); State Street Global Advisors, STEWARDSHIP REPORT 2021) each of the Big Three strategically votes on directors and shareholder proposals, often with an aim of driving change. In 2022 BlackRock began to permit certain clients, mostly institutional investors, to participate in proxy voting decisions, and Vanguard announced that it will launch a similar pilot program in early 2023.