Bogle Sounds a Warning on Index Funds

Discussion in 'Wall St. News' started by Altavest_Erik, Nov 30, 2018.

  1. Yes, U.S. index mutual funds have grown to huge size, with their holdings doubling from 4.5% of total U.S. stock-market value in 2002 to 9% in 2009, and then almost doubling again to more than 17% in 2018. Even that penetration understates the role of mutual fund managers, as they also offer actively managed funds, and their combined assets amount to more than 35% of the shares of U.S. corporations. If historical trends continue, a handful of giant institutional investors will one day hold voting control of virtually every large U.S. corporation. Public policy cannot ignore this growing dominance, and consider its impact on the financial markets, corporate governance, and regulation. These will be major issues in the coming era. https://www.wsj.com/articles/bogle-...1?cx_testId=0&cx_testVariant=cx_1&cx_artPos=0
     
  2. Interesting. Question though - if there are 5 huge shareholders of GE, couldn't those 5 shareholders get together and boot an inefficient board that is letting the company go into hell and a handbasket and bring in people who can do a better job easier than 2.7 million shareholders could?
     
  3. DaveV

    DaveV

    I don't see how. The funds themselves don't have voting power. The individual shareholders of the fund still retain their votes.

    However, the funds can cause dramatic changes to the prices of individual stocks by dropping/adding a company to the fund.