Friend of the blog Bernard Sharfman has published “How the ‘Market Share Opportunism’ of Investment Advisers is Harming Investors and Public Companies” over at ProMarket. I’m providing an excerpt below but you should go read the whole thing.

The competitiveness of our public companies is being weakened by the market share opportunism of those who manage (investment advisers like State Street and BlackRock) our mutual funds and exchanged traded funds (ETFs). Instead of maximizing shareholder wealth through voting and engagement, what is maximized is an investment adviser’s market share of the investment fund market. The result is economic harm to companies and the lowering of financial returns for the tens of millions of U.S. citizens who own shares in stock mutual funds and ETFs, those who hold common stocks directly in brokerage accounts, and beneficiaries of public pension funds. The only way to mitigate this investment adviser opportunism is for the SEC to establish and enforce new fiduciary duties for investment advisers that keep them focused on maximizing the financial value of their funds when exercising their shareholder voting authority and engaging with portfolio companies. Shareholder voting and engagement with portfolio companies has become increasingly based on political values, not wealth maximization. Such voting, no matter what part of the political spectrum it represents, pressures corporate boards into making decisions that are not expected to maximize shareholder value. Without such maximization, companies are less likely to enter into the most profitable supply chain arrangements, human capital decisions, and investment opportunities. This makes them less competitive compared with those companies who do not face such pressures.