Three fund managers may soon control nearly half of all corporate voting power, researchers warn

A decade after some of the nation’s largest U.S. banks helped to bring the financial system to its knees, a new kind of “too big to fail” risk may be emerging in a very different corner of the market: index funds.

Three index fund managers currently dominate ownership of shares of publicly traded companies in the U.S., and their control is likely to tighten in coming years, according to a June research report.

Concentrated ownership — what the authors refer to as the “Giant Three scenario” — means investors and policy makers need to keep a careful eye on the role of fund managers in upholding corporate governance, argue authors Lucian Bebchuk of Harvard Law School and Scott Hirst of Boston University in a working paper titled The Specter of the Giant Three.

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