The Specter of the Giant Three
National Bureau of Economic Research. Working paper

Research Retrieved: July 2019
Retrieve the paper from the SSRN


The landscape of the asset management industry is changing rapidly. A major trend is the explosive growth of index investing, driven by the vast and continuously increasing demand for index funds by institutional investors, individuals and their advisors. In this paper, Bebchuk and Hirst (2019) study the rise of the so called Big Three among the index fund managers, BlackRock, Vanguard, and State Street Global Advisors.

Key Findings

  • Structural factors drive the heavy asset concentration in the hands of the Big Three: First, economies of scale give the three funds a first mover advantage, as large investment volumes enable them to operate at lower costs relative to the assets under management compared to later entrants. Second, larger funds benefit from liquidity advantages and can exploit additional advantages by trading at more favourable conditions. Third, the nature of index fund offerings enables established players to quickly cater to new customer interests with new products. The potential for rivals to unseat them is thereby limited.
  • The Big Three can exert substantial voting control: Their joint stakes in S&P 500 companies have almost quadrupled over the past two decades, each of the three funds individually manages share blocks of at least 5% in a vast number of public companies, and collectively, the Big Three hold 25% of the voting power at the average S&P 500 company.
  • The Big Three could become the Giant Three: Altogether, the three funds have absorbed more than 80% of all inflows into the asset management industry in the past decade, and there is a real prospect that index funds will continue to grow.

Relevance for Practice

Based on past trends, the authors illustrate that the Big Three could cast as much as 40% of the voting power in S&P 500 companies within two decades. This figure calls both policymakers and practitioners to attention, as it indicates that corporate voting in the most significant public companies could be dominated by the three index funds. This concentration could be critical, as previous studies indicate that the three funds tend to be too supportive of corporate managers.