Would the Asset Manager Economy Be Possible to Conquer?

We can all agree that asset manager have a lot of power. Asset managers are financial services that invest their clients’ money in various assets, including stocks, bonds, and more. Their main goal is to help their clients amass wealth. These companies have enormous political and economic clout due to the trillions of funds they handle and their pervasive influence at the federal level.

Asset Manager: What Is It?

An asset manager acquires, holds, and sells investments that have the potential to increase in value. It aims to increase overall wealth over time.

Asset management experts carry out this function for the benefit of their clients. Financial advisers or portfolio managers are other names for them. Some operate independently, while others are employed by investment banks or similar organizations.

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Types

Asset managers come in many forms based on the assets they handle and the degree of service they offer. Before choosing to invest, it is crucial to understand the manager’s responsibilities, as each form of asset management has varying levels of customer duty.

1. Financial Advisors Who Are Certified

Firms that manage client portfolios or provide advice on securities trading are known as registered investment advisers (RIAs). RIAs are subject to stringent regulations and must register with the SEC if they are responsible for managing assets exceeding $100 million.

2. Securities Dealer

An intermediary who purchases stocks and securities on customers’ behalf and provides custody of client assets is known as a broker. Due diligence on brokers is essential before making a purchase because, in most cases, they do not have a fiduciary obligation to their customers.

3. Wealth Manager

Financial advisors advise customers on investment opportunities and execute asset trades on their behalf. Always inquire as to whether or not a financial advisor has a fiduciary obligation to their customers. Many financial planners focus on one issue, such as tax or estate planning.

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4. A Robotic Adviser

No human being can be considered the most cost-effective investment manager. A robo-advisor is an algorithm that may be designed to sell and buy investments by predetermined goals and risk tolerances.

 The algorithm then rebalances the investor’s portfolio automatically. Robotic financial advisers are more affordable than human advisors as no human intervention is required.

What Are The Key Differences Between a Brokerage and An Asset Management Firm?

Individuals with substantial assets often employ the services of asset management organizations, which are fiduciary businesses. In most cases, these organizations can trade accounts at their discretion and must act honestly when representing clients. No broker manages a client’s portfolio; they execute and facilitate deals.

What Is the Role of the Asset Manager?

An asset manager’s job is to build a client’s portfolio, keep tabs on it daily, adjust as needed, and keep the customer updated.

Which Organizations Provide the Best Asset Management Services?

With $9.46 trillion in assets under management (AUM) as of February 2024, BlackRock, Vanguard Group, Fidelity Investments, The Capital Group, and Amundi ranked first through fifth, respectively, in terms of worldwide AUM.

Digital Asset Manager: What Is It?

When all of an organization’s members need access to certain media assets, digital asset management (DAM) makes storing them in one place easy. Large audio or video files that require simultaneous editing by many personnel teams sometimes necessitate this.

Would the Asset Manager Economy Be Possible to Conquer?

The rise of megafirms like BlackRock and Vanguard, which are asset managers, has led to several injustices, including increasing inequality since these businesses have become major owners in hundreds of enterprises. This is why asset managers have been hit hard by criticism and organizing in the last ten years.

Also, despite persistent mobilization, asset managers must do climate change and workers’ rights. For instance, earlier this month, BlackRock and State Street caused a stir when they withdrew from Climate Action 100+, a group of investors that claimed to be dedicated to decarbonization. 

This retreat follows years of pressure on these companies over climate change, which proved they were engaging in greenwashing in the banking industry.

To launch successful attacks on asset managers, we must address the following questions:

1. Does an asset manager have much sway?
2.  Are these the places where companies wield their power?
3.  What kinds of structures work best for asset managers? How can we view asset managers through the lens of an anticapitalist understanding that the value of assets under management soared to $108.6 trillion by 2021, more than double the combined GDP of the world’s ten biggest countries?

 Many asset management professionals who consider themselves politically progressive get their take on these issues. While asset managers are important players in the corporate power structure, they said, it takes a lot of work to make significant progress with them on issues due to the constraints of their business models. 

Democratic methods of controlling society’s resources are necessary to tackle these challenges.

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Ascendancy of the Asset Manager

• The so-called “passive” funds linked to the general stock and bond markets are the backbone of asset managers’ success, particularly the “Big Three” of State Street, BlackRock, and Vanguard. 
• An investor whose shares in BlackRock’s S&P 500 Index Fund go up and down with the market as a whole is effectively investing in hundreds of large firms. While most people associate asset managers with “passive” investment, other organizations manage assets devoted to considering private equity and hedge funds for active investment options.
• Concentration and exponential expansion have characterized the asset management sector in recent years. There were $36.4 trillion in assets under management worldwide in 2005. 
• However, consumers increasingly sought passive asset management businesses as low-fee intermediates to handle their assets after the 2008 financial crisis devastated the banking system, with many institutions falling or bailing out. 
• Direct holdings of real assets, such as housing and infrastructure, by active asset managers also experienced a boom in investments. The value of assets under management soared to $108.6 trillion by 2021, more than double the combined GDP of the world’s ten biggest countries.
• Because of their enormous influence over the world as we know it, asset managers have become a focal point of progressive organizing efforts.
• Eighty-eight percent of the corporations in the S&P 500 have BlackRock, Vanguard, or State Street as their top shareholders, and thousands of other firms have them as important stakeholders. 
• Top companies like Chevron and Lockheed Martin count the Big Three among their beneficial owners since they possess 25% or more of the equity holdings. Despite not owning the investments they oversee, asset managers influence the amount of stock investors may purchase from them.
• BlackRock is particularly influential in the US government and economy, as it controls a substantial amount of capital. Currently, the organization manages more assets than any other asset manager, totaling $10 trillion.
•  Its political clout is directly proportional to its financial clout; the Biden administration’s US Treasury Department is full of former CEOs.” COVID-19 led to financial market changes, causing investment losses and volatility.
• ” Trump administration officials met with BlackRock executives for consultation. The Federal Reserve’s COVID-19 bond-buying program was ultimately carried out through BlackRock.

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Everyone Can Own Assets

• Because of their enormous influence over the world as we know it, asset managers have become a focal point of progressive organizing efforts. Asset managers handle the money and, by extension, the true power behind any business target. Whether it’s private prisons, oil firms, war profiteers, or even the boss, this is likely the case. Amid the revolution, BlackRock, Vanguard, and Fidelity have become the top of the corporate food chain.
• Benjamin Braun, a political economist who has penned several pieces about asset managers, argues that the topic cannot be ignored. “The banking industry is crucial to the functioning of modern capitalism, and these institutions are both enormous and influential.”
• Asset managers have disproportionate financial interests in the world economy, making them key players in the current capitalist problems, such as climate change. With more than $300 billion in listed fossil fuel interests between them, the Big Three control a disproportionately large portion of the fossil fuel business.
• According to one research, out of twenty worldwide shareholders with the financial clout to hasten a green transition via governance decisions, ten are US asset managers. Theoretically, asset managers can also influence activist-targeted corporations’ governance battles.
•  Braun said, referring to the companies’ size, “In a contested vote, these firms are almost by definition the swing vote.”
• There has been an increase in campaigns targeting asset managers as the public becomes more aware of this power imbalance. According to Adrienne Buller, a researcher and author whose works include Owning the Future: Power and Property in an Age of Crisis, “there has been huge value in popularising asset managers as an industry and BlackRock as a name among climate activists in the movement.” So says Buller. 
• As one example, the Stop The Money Pipeline coalition’s campaigners have done an excellent job of drawing attention to how big banks and asset managers have propped up the fossil fuel sector.
• “Compared to the fossil fuel majors, they were practically invisible for so long,” remarks Buller. She claims that there is “great value in pointing out their power and hypocrisy” when it comes to asset managers who claim to be environmentally conscious but invest heavily in the fossil fuel business.

Preexisting Limitations

When it comes to progressive issues, there is good reason to be skeptical of asset managers’ capacities to be swayed by movements, whether it’s a single portfolio business or their extensive holdings, even though campaigns targeting asset managers are on the rise.

• Asset managers may theoretically affect hundreds of firms and whole industries, but they encounter limitations caused by their organizational models that restrict their ability to act.
• Large index fund companies, such as BlackRock and Vanguard, amass wealth by holding a diverse and generalized portion of the capitalist pie. Their primary objective is consistent increases in asset values and stock market indexes. According to Buller, the foundation of their business approach is being a worldwide investor. “The global economy has many followers, and BlackRock is one of them.”
• Instead of worrying about any firm’s actions (or even profitability) in their portfolio, asset managers focus on macroeconomic problems such as legislation and monetary policy. Brett Christophers, a professor at Uppsala University in Sweden and author of books like Our Lives in Their Portfolios: Why Asset Managers Own the World, recently observed that asset managers do not want control over the companies whose passive index funds own shares. “Their goal is to take a back seat as shareholders.”
• He says that the industry is not a unified force that controls businesses. “BlackRock, Vanguard, and State Street are not a cartel,” Christophers announces. The 20,000 firms that possess six or seven percent shares do not have a meeting place to plot their impact on management.
• Index fund asset managers can only oversee a few firms if tied to the low-fee strategy that has driven their expansion. Their plan would be jeopardized, and they resented a convincing threat of disinvestment.

Another inherent paradox is that asset management firms often hold significant stock in the companies whose investments they purport to oversee. 

• Asset managers monitor the holdings of large organizations, including 401(k) pools, so they may avoid controversy with the executives who choose the firms to handle billions of dollars in corporate money.
• The “anti-woke” reaction in states controlled by Republicans has recently presented fresh difficulties for fund managers. The move to prohibit and withhold funding from companies adhering to what is known as “ESG” standards, which stand for environmental, social, and corporate governance factors, has unsettled major financial institutions like BlackRock in Texas.
•  This demonstrates that asset managers are not immune to right-wing attacks on their reputations and bank accounts.
• “As asset managers take an activist stance in corporate governance, they put themselves in a position where they could face political backlash, which could manifest as stricter regulation,” Braun stated. “And that is the one thing they are most concerned about avoiding.”
• Asset managers are trying to stay out of hot water while pushing policies to keep market indexes up. They are firm in their intention to ignore and downplay any form of dissent.

To challenge the influence of asset managers, we need a coalitional, multi-pronged strategy.

Components of Business Plan

Intermediate Perspectives

Given the importance of asset management businesses to the global capitalist economy, organizers should not be afraid to criticize them. However, the limitations of asset managers’ methods of financial accumulation nullify the strategic basis for targeting them, which is the belief that interfering with their extensive ownership of capital might influence governance battles, transform whole industries, and get the government’s attention.

• The primary emphasis should be on something other than asset management. Endowments, charities, and retirement funds are among the institutional investors providing them billions of dollars in client money. Organizers could be better served by focusing on winning over receptive CalPERS or union pension fund trustees, with whom they are already interacting, rather than attempting to reason with BlackRock CEO Larry Fink.
• There are limitations to publicly humiliating businesses, but it may hurt to damage their reputations with major clients. Braun says what happens if their brand is damaged and they cannot recruit institutional investors’ money is more of a problem. As the saying goes, “Reputation is the lever.”
• Another area for improvement for organizers is the political landscape, as asset managers rely on supportive regulatory measures. Authorities may punish asset managers for detrimental behaviors, such as transparency requirements or market closures.
• Furthermore, private equity firms and active asset managers such as BlackRock and Vanguard may be more suitable targets than passive index fund behemoths like BlackRock and Vanguard.
• As Christophers explains, we rely on private equity firms like KKR, Blackstone, and Macquarie to actively spend trillions of dollars on our essential infrastructure, including housing, electricity, utilities, and hospitals. Unlike passive investors, their business strategy relies on swiftly and mercilessly extracting money from acquisitions they devour, which is why they’re more hands-on.
• Climate catastrophe may be particularly the case. There has been far less investigation of these “entities that are direct owners of fossil fuel industry companies and projects compared to the big public asset managers,” as Buller put it. “These private, unlisted spaces are home to many dirtiest players.”
• Companies known for their passive investment strategies often have sizable active investment divisions. Take BlackRock’s recent agreement to purchase infrastructure fund manager Global Infrastructure Partners for $12.5 billion, for example. This is the largest acquisition by BlackRock in fifteen years.

We need a coalitional, multi-pronged strategy to challenge asset managers’ influence. We should not abandon naming and shaming strategies. 

• Protests and rallies that bring attention to asset managers’ dominant position are encouraging and useful, but only if the organizers don’t think it will be easy to convince BlackRock or Vanguard to withdraw their investments from Dow or Exxon soon.
• By pointing out BlackRock’s hypocrisy, Buller means that the company wants to be seen as a sustainability leader yet is falling short in that regard. “Going after that deceptive branding is worthwhile and has the potential to influence their choices.”
• In addition, allying with elected officials or institutional investors who have the authority to withhold client funds from enterprises or advocate for state regulation may make campaigns centered around certain companies, problems, or sectors more successful.

 Important opportunities also arise during social crises, highlighting the links between asset managers and damaging sectors.

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Modification to the System

Changes to the entire system are necessary in the end. Buller points out that laws and regulations provide “intermediary solutions,” but that isn’t the “end game.”

“This system is incredibly anti-democratic,” she declares. “We must devise strategies that challenge the industry’s complete control over the distribution of capital.”

Public and worker-controlled alternatives provide democratic and responsible ways to manage people’s reliance on assets without adding to the concentration of power in the hands of a few vested interests that fund destructive businesses.

Christophers point out one big obstacle to simple change: Modern capitalist nations, shaped by neoliberalism, view asset managers as solutions rather than problems. They envision the private sector as a recipient of these investments.

He argues that asset managers will never achieve the outcomes the left would deem most desirable as it is not the intended function of capital. “The issue isn’t necessarily with asset managers per se, but rather with the fact that governments have delegated all of our major challenges to them instead of addressing them in-house.”

Though it rings true, Christophers argue that painting asset managers as a “malignant force” in society is a “misdirection of energies.” He explains that capitalist institutions operate to maximize profits. The organizers would do well to direct their attention to the governments responsible for the prominent position asset managers now hold.

Creating a political movement to increase transparency and inclusion in asset management and the financial sector is no small feat. However, groups serious about weakening finance capitalism must maintain this analysis at the forefront.

According to Braun, “even if they may seem absolutely unattainable,” it is crucial to remember these loftier objectives.

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