Executive Summary
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Money managers invest trillions of dollars on behalf of millions of individuals.
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Investments primarily involve the holding and trading of shares.
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Money managers that own equities have a powerful role in the governance of companies, should they choose to exercise it.
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Active stockholders can be of great influence on how, and by whom, companies are managed.
A Vast and Diverse Industry
Money managers (also known as fund managers or investment managers) manage money on behalf of other people. In most Western countries more than half the population will, directly or indirectly, have a money manager working for them. The managers find suitable investments, and are usually given the discretion by clients to make investments on their behalf.
It is usually the client who owns the investment and takes the risk that it will do well or badly. Therefore placing money with a money manager is different from putting it in a bank account. The bank offers a given return on your money, and it takes the risk on any loan or investment it may make.
The biggest money managers are household names; often they are part of banks or insurance companies. Examples are Fidelity, Vanguard, Barclays Global Investors, Nippon Life, Generali, Allianz, AXA, and Legal and General. Each of these companies manages hundreds of billions, and sometimes over a trillion dollars of people’s savings. They have both individual clients and large institutional clients, such as pension funds, who will in turn represent many thousands of savers.
There are literally hundreds of money managers. Sometimes one money manager will use the funds they have under management to invest in another money manager’s fund if they feel that gives them access to particular investment skills. And each may offer scores of different funds, each one designed to attract the savings of a particular type of investor.
Money managers invest in all sorts of things, from property to commodities, from government bonds to exchange rate futures. But their largest investments are in the shares and bonds issued by large companies, typically publicly traded companies, whose securities can be easily bought and sold should the need arise.
Money managers are hugely significant in large and developed capital markets. More than 80% of public company shares in the United Kingdom are owned through money managers. In the United States, Japan, and much of Continental Europe, the figure is around 70% and growing.1
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