Index Funds Are Improving Corporate Governance

Since 1998 the share of assets held by passive institutional investors — mutual funds designed to track stock indices like the S&P 500 rather than actively picking winners — has tripled. Last year clients poured an additional $414 billion into U.S.-based, lower-cost index funds offered by Vanguard, BlackRock, State Street, and others. At the same time, clients withdrew $207 billion overall from actively managed funds, according to the research firm Morningstar. The assets of BlackRock alone are now larger than the GDPs of all but two countries.

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