Passive is Massive

April 2022
By Joy Yang, Global Head of Index Product Management

While the world was tweeting about Elon Musk’s 9% stake and bid to takeover Twitter (TWTR US), Vanguard quietly disclosed that it was the largest shareholder in Twitter holding over 10% of the company shares outstanding. Together, the top 3 passive managers (total assets under management), Blackrock ($10 tn), Vanguard ($8 tn) and State Street ($4 tn), own over 20% of Twitter. Passive is Massive!

Theoretically, active managers set prices and passive managers are not motivated by price, buying what is in the index. However, as passive managers grow in size, their coordinated trading can sometimes turn them from price-takers to price-makers with significant influence in their voting power. The high costs of active engagement and lack of incentives to engage actively, means that passive houses often vote in line with management and in sync across all their funds.

As we follow Musk’s activity in Twitter, it’s also interesting to note that Vanguard holds over 6% of Tesla. 

Top Shareholders in Twitter and Tesla

 

About the Author:

Joy Yang is Global Head of Index Product Management at MV Index Solutions (MVIS). She is responsible for managing MVIS products and services to accelerate innovation in financial index design and adoption. Joy brings more than 25 years of investment experience to MVIS, having led teams delivering index and quantitative-active investment solutions at Arabesque Asset Management, Dimensional Fund Advisors, Vanguard, Aberdeen Standard Investments, AXA Rosenberg, and Blackrock. Joy has an MBA from the University of Chicago Booth School of Business, and a BS in Electrical Engineering from Cooper Union’s Albert Nerken School of Engineering.

 

The article above is the opinion of the author and does not necessarily reflect the opinion of MV Index Solutions or its affiliates.

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