Why Passive Investing Increases Corporate Governance and Activism

Since the 2008 financial crisis, market participants have acted increasingly on the realization that indexing strategies are superior to investing in individual stocks or actively managed funds. This has led to an explosion in so-called passive investment strategies, resulting in more concentrated power for the major investment institutions. The numbers certainly don’t lie. Between 2008 and 2015, investors moved $1 trillion into passively managed funds . As a result, passive institutional investors such as BlackRock, State Street and Vanguard wield a heavy hand in Corporate America.