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Ben Gould's avatar

Re: BlackRock & the financial crisis, perhaps you've already seen Benjamin Braun's 'Asset Manager Capitalism as a Corporate Governance Regime' & Petry-Fichtner-Heemskerk's 'Steering capital: the growing private authority of index providers in the age of passive asset management'.

PFH identifies "two reinforcing trends [triggered by the financial crisis] that transformed index providers from merely supplying information to exerting authority. First, the global index industry concentrated. ... The second and more consequential trend was the money mass-migration towards passive investments". Braun's explanation of the first is that "while the contingency of the 2008 financial crisis played an important role, concentration in the financial sector has been driven by some of the same forces as concentration in labor and product markets". For the second, "the financial crisis of 2008 accelerated the shift from expensive active funds into low-cost index funds" who enjoy network effects and economies of scale, making their shares more liquid as more investors pile in.

Braun's claims seem to mean that while the crisis gave an added boost to already-existing forces pushing toward concentration, investors also began to feel acutely unsure of the volatility of active investment. Somehow maybe not an entirely satisfying answer... & includes nothing specific about BlackRock vs other AMs.

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Glenda Burgess's avatar

Enjoyed your interview in The Shanghai Book Review. Fresh perspective.

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