Thread by @fichtner_jan

Out now in @RIPEJournal - the first IPE analysis of the three big index providers MSCI, S&P DJI, and FTSE Russell:
"Steering capital: the growing private authority of index providers in the age of passive asset management"
tandfonline.com/doi/full/10.10…
@johannes_petry @UvACORPNET
1/n

Since the global financial crisis there is a money mass migration of over US$3,000 billion from actively managed funds to passively managed funds, such as ETFs, that simply replicate indices. The important benchmark indices are owned by the three big index providers.
2/n

As a result, the revenues of MSCI, FTSE Russell and S&P DJI have exploded in recent years. And they are hugely profitable - MSCI has profit margins of over 70% in the index segment!
3/n

We argue that these index providers have become actors that exercise growing private authority as they 'steer' investments through their indices. Companies (say Saudi Aramco) and countries (e.g. China) included into big indices receive investment - exclusions mean outflows.
4/n

Prior to the age of passive investing, indices and index providers primarily had an informational role for investors and financial markets - they were 'helpful' but not 'essential'.
5/n

The ongoing massive shift to passive funds transforms the role of index providers and catapults them into a new position of private authority in global financial markets.
6/n

Hence, in this new age of passive asset management index providers are becoming gatekeepers that exert de facto regulatory power and thus may have important effects on corporate governance and the economic policies of countries.
/end

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