Matthew J. Mallow’s new paper on index funds:
This paper seeks to ground the debate around asset managers, index funds and corporate control firmly in the practical context of the operation and regulation of asset managers. Acting on be- half of clients, asset managers are incentivized to monitor companies for long-term performance. As minority shareholders, they lack sufficient voting power to exercise control. Voting records exhibit variation in asset manager voting behavior, challenging the perception of coordinated voting blocs. Thousands of actors are involved in corporate decision making, many better positioned to influence public companies than asset managers. The investment stewardship activities of asset managers raise the bar on corporate governance and increase the focus on long term sustainability. Some policy measures suggested by academic commentators seeking to limit or silence the voice of asset managers would stifle this effort and harm ordinary savers and investors.