1. Special Report: Index Funds Invest Trillions But Rarely Challenge Management

    Special Report: Index Funds Invest Trillions But Rarely Challenge Management

    (Reuters) - Index funds now control half the U.S. stock mutual fund market, giving the biggest funds enormous power to influence decisions and demand better returns at the companies in which they invest trillions of dollars. But the leading U.S. index fund firms, BlackRock Inc, Vanguard Group and State Street Corp, rarely use that clout...

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    1. If we think that informed and engaged shareholders play an important role in disciplining company management, the rise of index investing is a problem.
    2. Continuing to have a dialogue without airing all of our dirty laundry
    3. A vote against management is a sign of a failed engagement.
    4. It's wrong to measure the effectiveness of BlackRock's investment stewardship efforts solely by our proxy voting record.
    5. We use our voice and vote to influence companies on long-term governance and sustainability issues.
    6. Talking to companies behind the scenes on this particular issue is a bit like trying to boil the ocean.
    7. There's not much room for them to be investing in stewardship, particularly when real stewardship is expensive and you're charging some customers close to a zero management fee.
    8. The awards are unusual, and the complete lack of performance-vesting criteria heightens concern.
    9. These funds talk a big game, using a lot of flowery language.
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