The permanence paradox: why shareholder value always wins (No matter who your biggest investor is)

The powerful 'Big Three' index fund managers still seem surprisingly ill-equipped to fend off attacks from hedge fund activists. This battle for the future of corporate DavisAmerica is as perplexing as it is unpredictable, writes Jerry DavisDavis

The years since the 2008 financial crisis have seen two paradoxical trends in the American stock market. On the one hand, index fund managers BlackRock, Vanguard, and State Street have rapidly grown to become the largest shareholders in corporate America, collectively owning roughly 22% of the S&P 500. These "permanent universal owners" could be a potent force for enabling corporations to take a long-term perspective, investing in their workers, aggressively reducing their carbon emissions, and building enterprises to last. Yet the mid-2000s also saw a spike in hedge fund activism aimed at maximizing share price immediately. Activism leapt just in time for the 2008 financial crisis and has not ebbed since, reaching such stalwarts as Coca-Cola and Procter & Gamble. In any given year, 200 companies face a hedge fund…

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I by IMD (Digital) - 1 Issue, 09. March 2023

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