How vast asset managers impact “our increasingly cartelized economy.”
The world’s biggest asset manager, BlackRock, was splashed across the front pages of the Spanish financial news yesterday. The firm had just raised raised its stake in Spain’s telecoms giant Telefónica to 336 million shares — the equivalent of 6.7% of Telefónica’s total capital, with a market value of just under €3 billion.
In the short space of five months BlackRock has almost doubled its holdings and is now the largest owner of Telefónica stock, ahead of Spain’s second biggest bank, BBVA, which holds 6% of the shares. The asset manager has also expanded its participation in Telefónica’s international subsidiaries, raising its holdings in Telefónica Deutschland to 0.76% and Telefónica Brasil to almost 2%, making it the firm’s biggest institutional shareholder.
BlackRock is the largest institutional shareholder of Telefónica’s two main market rivals in Spain, holding 7.3% of Vodafone and 1.96% of part state-owned Orange. It’s also the second largest investor in British Telecom, after Deutsche Telekom, with a 7.84% stake. In the U.S. market BlackRock has the third largest position in Verizon, with 6.17% of the capital, and the second largest position in AT&T, with 5.84%.
A Vast, Sprawling Empire
The US fund manager has built up such a vast, sprawling financial empire since its creation 29 years ago that it has even begun to draw unwanted attention from the academic world. Two blockbuster studies – one by Einer Elhauge of Harvard Law School and the other by Martin C. Schmalz of Stephen M. Ross School of Business and José Azar and Isabel Tecu of Charles River Associates – have confirmed that BlackRock and some other big funds have acquired such large shareholdings throughout the U.S. and global economy that they cause the companies they jointly own to compete less vigorously with one another.
Elhauge’s study, “Horizontal Shareholding as an Antitrust Violation”:
In the banking industry, the top four shareholders of JP Morgan-Chase (BlackRock, Vanguard, Fidelity, and State Street) are also the top four shareholders of Bank of America and four of the top six shareholders of Citigroup, collectively holding 19.2% of JP Morgan-Chase, 16.9% of Bank of America, and 21.9% of Citigroup.
These same shareholders are also the top four shareholders of Apple (BlackRock, Vanguard, Fidelity and State Street) and four of the top five shareholders of Apple’s main rival, Microsoft.
The exact same ownership patterns occur across almost all industries — and not just in the US. Granted, most of the time it’s other people’s money that firms like Vanguard, Fidelity, and BlackRock are investing, but that’s not to say that they are impartial and disinterested.
As Vanguard puts it, they may be passive investors, but they are not passive owners. “We are an active voice,” BlackRock’s chairman and CEO, Laurence D. Fink, is fond of saying — a voice that is now heard in just about every boardroom of just about every major company on this planet…
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