In a groundbreaking move, BlackRock, the world’s largest asset manager, has announced plans to grant retail investors in its premier exchange-traded fund (ETF), iShares Core S&P 500 ETF (IVV), voting rights in proxy decisions starting from 2024.
This significant action comes as part of a broader industry trend that has seen other giant index fund providers, like State Street and Vanguard, explore methods to incorporate ordinary investors’ voice in their investment decisions.
BlackRock empowering investors in decision-making
The move gives power to retail investors, who now have the opportunity to voice their preferences from a selection of seven distinct, general policies.
These policies range from aligning votes with management decisions to prioritizing Catholic values or factors concerning environment, social and governance (ESG).
However, it is important to note that the power of retail investors is not absolute as they will not be able to cast direct votes on individual companies.
BlackRock’s initiative represents the most extensive retail proxy voting attempt to date, considering IVV’s whopping $342 billion in assets. Other asset managers like Charles Schwab, Vanguard, and State Street have run similar experiments involving retail investors in their respective funds.
The recent measure by BlackRock comes amidst growing concerns from critics at both ends of the political spectrum. Critics argue that such large fund managers have been prioritizing social and environmental goals at the expense of investors’ financial returns.
On the other hand, progressive social activists have raised eyebrows at the decreased support for climate-related shareholder proposals from these fund managers compared to the previous year.
These criticisms are underpinned by the contention that such large asset management firms wield a disproportionate influence over U.S. companies due to their sizeable shareholdings, often reaching up to 20% of the shares in many U.S. firms.
A Step Towards Democratizing Investment
BlackRock, alongside other fund managers, counters this criticism by stating that they aim to provide what their clients demand, be it ESG-focused investments or a pure profit-driven approach.
The decision to grant retail investors voting rights on proxy decisions aligns with this philosophy, making their claim more believable and possibly alleviating some pressure related to individual voting decisions.
This shift in proxy voting rights is not entirely new for BlackRock. They already provide institutional clients, who control $2.1 trillion in index assets, the option to dictate how their shares are voted.
As of March’s end, assets worth $555 billion had utilized this option. In the retail pilot, the voting of IVV’s holdings will correspond to the proportion of investors who opt for each policy.
As BlackRock continues to champion this revolutionary initiative, the asset manager has voiced commitment towards a future where every investor has a say in the shareholder voting process, according to Joud Abdel Majeid, the global head of investment stewardship.
This commitment extends beyond U.S. borders, with the firm working on a similar program for its UK retail asset owners.
Meanwhile, other fund managers, like Vanguard and State Street, plan to expand their programs based on the positive reception of their pilot projects.
Their attempts further indicate the industry’s shift towards democratizing investment and ensuring the voice of the retail investor is heard.
