Description
Passive Asset Managers (PAMs) BlackRock, Vanguard and State Street are popularising passive investment, managing trillions of dollars of investments on behalf of millions of people. Passive investment tries to match the market rate of return by tracking indices (e.g. FTSE100), rather than outperform them. Despite their central position in financial markets, PAMs face opposition from the right over perceived ‘wokeness’ related to the ESG agenda and from the left for over-concentrating financial power. In response, PAMs argue they are democratising and disintermediating finance, thereby claiming they merely reflect investors wishes. These narratives do not reflect the practices of asset managers. Instead, the connections with index providers and proxy advisors represents a centralisation of financial organisation. The narratives of democratisation and disintermediation seek to legitimise both the passive investment strategy and PAMs in the eyes of politicians and regulators. The millions of investors that asset managers represent are mobilised to lobby politicians to encourage retirement saving, to oppose divestment from state pension funds and for opt-outs from financial regulation over ownership concentration. Ultimately, whilst PAMs legitimise themselves by deploying narratives of democratisation and disintermediation to argue they are passive institutions not exercising power, this ignores the power embedded in the narratives they deploy to legitimise themselves.
