This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

The Secret Power Behind Top U.S. Firms: Index Funds

Investors' growing disdain for actively managed mutual funds has produced a disturbing consequence: Ownership of American public companies is increasingly concentrated in the hands of just four giant index-fund managers.

Through the end of 2003, the world's four largest index-fund firms -- Barclays (BCS), State Street (STT - Get Report), Fidelity Management and Vanguard Group -- in aggregate held an average of 12.6% of the 20 largest U.S. companies on behalf of their clients.

Together, for instance, this elite band owns 15% of IBM (IBM - Get Report), 15% of Citigroup (C - Get Report) and 14.5% of Johnson & Johnson (JNJ - Get Report).

Barclays, a British bank, has emerged as the first among near-equals. It has paired its new iShares exchange-traded funds business with its long-established pension fund indexing business to become one of the largest single holders of U.S. companies, if not the largest -- about $1 trillion worth. Fourteen of the 20 largest U.S. public companies now count Barclays as their largest institutional owner.

What Happened to Shareholders' Rights?

The concentration of ownership has unsettling implications for the corporate governance issues now grabbing investors' attention. Consider the recent shareholder vote over the chairmanship at Disney (DIS - Get Report), which counts Barclays as its top institutional investor, with a 3.5% stake.

Unlike large, U.S.-based shareholders such as the New York and California state pension funds, which held relatively meager positions in the stock, Barclays has refused to publicly reveal its vote on the Disney chairman, or any other matters. "We don't discuss how we vote before or afterward," said Barclays Global Investors spokeswoman Christine Hudacko.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
BCS $16.08 0.66%
C $52.81 -0.17%
DIS $110.16 0.58%
JNJ $100.58 -0.49%
IBM $170.72 0.55%

Markets

DOW 18,037.97 -42.17 -0.23%
S&P 500 2,108.92 -8.77 -0.41%
NASDAQ 5,060.2460 -31.8390 -0.63%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs