Vanguard Black Rock and other Boogeymen

[mntnmn117]

So there’s a lot on uneducated talk out there about Vanguard and Blackrock as these giant evil corps. Aren’t they just running index funds so they don’t really do anything but act as middle men?

I guess I was hearing this idea that that Black Rock is buying up all the single family homes. Then I realized I own a REIT Index fund and I’m probably part of the problem. Is that accurate? Are we index fund investors the real boogeyman taking over the world?

[Monocle Money Mouth]

There’s a finance channel on YouTube that covered this recently.  It’s called The Plain Bagel. I think the short answer is no. Financially uninformed people are confusing BlackRock with Blackstone and Vanguard is guilty by association because it’s a big brokerage.

[WayDownSouth]

So there’s a lot on uneducated talk out there about Vanguard and Blackrock as these giant evil corps. Aren’t they just running index funds so they don’t really do anything but act as middle men?

I guess I was hearing this idea that that Black Rock is buying up all the single family homes. Then I realized I own a REIT Index fund and I’m probably part of the problem. Is that accurate? Are we index fund investors the real boogeyman taking over the world?

All major banks and brokerages are guilty and corrupt to the core. However you can't trade without a brokerage, so that makes everyone guilty by proxy if you want to see it that way. That's not quite fair in my opinion as I disagree with what Blackrock, Blackstone, and tons of major corporations do. Most of them I have the choice to support or not support depending on what I purchase.

There are some definite boogeymen out there and many much worse than the mentioned.

Keep in mind that not every Mustachian is an index fund investor. In addition, the totality of all investments of all combined mustachian index funds are just a pebble on the beach. So no, nobody here running or ruining the world by trying to retire early and using the markets to do so.

[Rob_bob]

I haven't heard too much about this but my understanding is that Blackrock and Vanguard vote the shares of the companies they hold in their funds.  Blackrock has a reputation for being very woke and that is how they vote the shares, which might not be the way you would vote if you could.

I have also heard about big companies buying up single family homes, they bid the price above what the average family can afford. So renting will be in more peoples future.

Are you participating in this by owning a REIT fund?  Maybe, depends on what the REIT fund holds.  I own a number of individual REITs and none of them own SFH.  Most will own multi family homes and apartments, I think there are only a handful of small REITs that buy SFH.  I don't know what BR does with the SFH they buy, hold them in their own portfolio or put them in a publicly/non-publicly traded fund?

[MustacheAndaHalf]

Corporations backed by private equity groups such as Blackstone and Pretium Partners bought tens of thousands of homes across the U.S. Sun Belt.
...
Large institutions owned roughly 5% of the 14 million single-family rentals nationally in early 2022, according to analysts.

https://www.cnbc.com/2023/02/21/how-wall-street-bought-single-family-homes-and-put-them-up-for-rent.html

[Ron Scott]

When I observe the antics in DC and the 3 branches of our government these days I sometimes think the only institutions keeping us in the ring are big business, DoD, and the Fed.

[WayDownSouth]

When I observe the antics in DC and the 3 branches of our government these days I sometimes think the only institutions keeping us in the ring are big business, DoD, and the Fed.

I second that and will add that I believe it's been that way for a long, long time - it's just blatantly apparent nowadays.

[Michael in ABQ]

So there’s a lot on uneducated talk out there about Vanguard and Blackrock as these giant evil corps. Aren’t they just running index funds so they don’t really do anything but act as middle men?

I guess I was hearing this idea that that Black Rock is buying up all the single family homes. Then I realized I own a REIT Index fund and I’m probably part of the problem. Is that accurate? Are we index fund investors the real boogeyman taking over the world?

Yes, pretty much.

It just exposes the glaring ignorance of Congress/Media when they complain how "Vanguard is the single largest owner of _______". No the couple million individuals and funds that own that index fund are the owners.

There are some large actively managed funds that do engage in how individuals companies are manage but Vanguard is not one of them to my knowledge. Blackstone is a private equity firm so they are actively involved in managing the businesses/assets they invest in. It does get conflated with BlackRock - which has passive index funds as well as actively managed private equity investments.

The government/media never seems to call out Fidelity or Charles Schwab as owning large portions of a company, perhaps just because they're better know as simply brokerage firms that have some investment funds. The latest numbers I found showed Vanguard has $8.6 trillion in Assets Under Management (AUM) Charles Schwab $6.6 Trillion and Fidelity $3.6 Trillion. BlackRock is the world's largest asset manage at $9.4 Trillion while Blackstone is around $1 Trillion.

[WayDownSouth]

Vanguard is the largest shareholder of Blackrock (if I'm correct). They're birds of a feather in the same way that publicly opposing national politicians are friends behind the scenes, or how you may see your local prosecutors and the cities top lawyers all spending time together laughing in an upscale bar after work.

Making your money off them is smarter than letting them take your money. Non-participation may be even smarter, but who knows. If they're controlling markets and you're losing money due to costs/inflation/etc., it'd be better to be getting some of that money back from them in the form of investments. That's the way I see it at least.

[ChpBstrd]

I guess Zillow fell off the boogeyman list when they exited their home flipping business after losing a crapton of money?

[WayDownSouth]

"Look, we're not boogeymen! Here's proof!"

https://finance.yahoo.com/news/vanguard-blocks-spot-bitcoin-etf-083220594.html

The drama never ends...

[Tyler]

So there’s a lot on uneducated talk out there about Vanguard and Blackrock as these giant evil corps. Aren’t they just running index funds so they don’t really do anything but act as middle men?

The answer is yes and no.

Yes, when you buy an index fund that they offer, they use your money to buy an appropriate percentage of every company in the index and deliver the returns on that investment to you. But no, they're not just passively acting as middle men. Since their name is listed as shareholders in each company (not you), they take advantage of the situation and use the voting rights (bought with your money) to force corporate governance or policy changes that are often politically driven on issues you may or may not agree with (ESG, DEI, etc). They all do it, but BlackRock is most notorious for it because Larry Fink is most vocal about his larger goals that have nothing to do with responsible money management.

To their credit, Vanguard recently announced their intention to create systems to allow investors in their funds to vote their own conscience with their shares. Once they made that announcement, BlackRock created a similar program. To date, I have only seen those rights afforded to a small number of pilot index funds or to large institutional investors that probably attend the same parties. So we'll have to see how that works out in practice and if normies ever have a say with their index fund voting rights. I have my doubts that the big players will give up that power so easily, but I'd love to be proven wrong.

So when I see people (including politicians) demonizing BlackRock, Vanguard, and State Street as uber-rich entities "owning every company", I usually roll my eyes because they either don't know how index funds work or are deliberately misleading people. But when I see people criticizing this tiny group of companies for forcing every company in the index to elect certain board members or follow specific politically-driven mandates, I think they have a point. It's wrong for a small handful of powerful people to use our money to push their agendas.

Also, companies like BlackRock have different business units that do way more than just run index funds. While their direct involvement in things like buying up SFHs may indeed be overstated or misunderstood, they're definitely not passive players in the rental market.

[WayDownSouth]

So there’s a lot on uneducated talk out there about Vanguard and Blackrock as these giant evil corps. Aren’t they just running index funds so they don’t really do anything but act as middle men?

The answer is yes and no.

Yes, when you buy an index find that they offer, they use your money to buy an appropriate percentage of every company in the index and deliver the returns on that investment to you. But no, they're not just passively acting as middle men. Since their name is listed as shareholders in each company (not you), they take advantage of the situation and use the voting rights (bought with your money) to force corporate votes that are often politically driven on issues you may or may not agree with (ESG, DEI, etc). They all do it, but BlackRock is most notorious for it because Larry Fink is most vocal about his larger goals that have nothing to do with responsible money management.

To their credit, Vanguard recently announced their intention to create systems to allow investors in their funds to vote their own conscience with their shares. Once they made that announcement, BlackRock created a similar program. To date, I have only seen those rights afforded to a small number of pilot index funds or to large institutional investors that probably attend the same parties. So we'll have to see how that works out in practice and if normies ever have a say with their index fund voting rights. I have my doubts that the big players will give up that power so easily, but I'd love to be proven wrong.

So when I see people (including politicians) demonizing BlackRock, Vanguard, and State Street as uber-rich entities "owning every company", I usually roll my eyes because they either don't know how index funds work or are deliberately misleading people. But when I see people criticizing this tiny group of companies for forcing every company in the index to elect certain board members or follow specific politically-driven mandates, I think they have a point. It's wrong for a small handful of powerful people to use our money to push their agendas.

Also, companies like BlackRock have different business units that do way more than just run index funds. While their direct involvement in things like buying up SFHs may indeed be overstated or misunderstood, they're definitely not passive players in the rental market.

Well said.

[dividendman]

What's the problem with some company buying a bunch of single family homes to rent? That's a "boogeyman" thing?

I guess I don't think any of the above is wrong *shrug*