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 Quote), State Street(STT Quote), 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 Quote), 15% of Citigroup(C Quote) and 14.5% of Johnson & Johnson(JNJ Quote). ...