The Investing Dominance of Vanguard and BlackRock

Investors are fleeing active management of stock investments for index funds. That puts Vanguard and BlackRock in the driver’s seat, because they are the sponsors of the leading index funds and ETFs. This article points out that if recent trends continue, the two firms will control enough of the stock market to effectively be in charge of many things. It explores what the effects might be of two firms controlling so much of the market.

None other than Vanguard founder Jack Bogle, widely regarded as the father of the index fund, is raising the prospect that too much money is in too few hands, with BlackRock, Vanguard and State Street Corp. together owning significant stakes in the biggest U.S. companies.

“That’s about 20 percent owned by this oligopoly of three,” Bogle said at a Nov. 28 appearance at the Council on Foreign Relations in New York. “It is too bad that there aren’t more people in the index-fund business.”

Vanguard is poised to parlay its $4.7 trillion of assets into more than $10 trillion by 2023, while BlackRock may hit that mark two years later, up from almost $6 trillion today, according to Bloomberg News projections based on the companies’ most recent five-year average annual growth rates in assets. Those gains in part reflect a bull market in stocks that’s driven assets into investment products and may not continue.