Charlie Munger was honest about the growing influence of index fund managers like BlackRock’s BLK Larry Fink. The late Berkshire Hathaway BRK BRK.B)) vice chairman warned that passive investing has resulted in a massive shift in voting power, one that he believed could have serious consequences.
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‘A New Bunch Of Emperors’
During shareholder Q&A at the Daily Journal Corporation DJCO shareholders meeting in 2022, Munger was asked about the impact of passive investing on stock valuations. His response was direct: "Oh, huge." He explained that the rise of index funds had concentrated power in the hands of a few asset managers who control shareholder votes. "We have a new bunch of emperors, and they're the people who vote the shares in the index funds. Maybe we can make Larry Fink and the people at Vanguard Pope," he joked.
But Munger wasn't laughing when he predicted that this shift would "change the world"—and not for the better. "I don't know what the consequences are going to be, but I predict it will not be good."
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BlackRock's Growing Influence
BlackRock, along with Vanguard VOO and State Street STT, has become one of the biggest shareholders in most major public companies. The firm's assets under management have soared to $11.6 trillion, more than doubling since 2016.
Traditionally, index funds have been seen as a way for everyday investors to passively invest in the market. But instead of just holding shares, asset managers have taken an increasingly active role in shaping corporate policies.
Fink, in particular, has been vocal about pushing companies toward environmental, social and governance goals. As The Wall Street Journal reported in 2022, Fink threatened in a letter to CEOs to vote against corporate managers if they didn't comply with ESG disclosures set by the Sustainability Accounting Standards Board.
This kind of pressure has real consequences. For example, Climate-focused activist fund Engine No. 1 held just 0.02% of ExxonMobil XOM shares but was able to oust three board members in 2021—thanks to the backing of BlackRock and other major index fund managers.
The Debate Over BlackRock's Role
Munger's concerns highlight a growing debate over whether asset managers should wield this much power. "I think the world of Larry Fink, but I'm not sure I want him to be my emperor," he said.
His words serve as a warning about the unintended consequences of passive investing. When a few firms control voting rights across much of corporate America, decisions that impact millions of investors and workers end up in the hands of a small group of executives.
Munger believed in capitalism, but he also believed in accountability. His criticism of BlackRock's influence wasn't about politics—it was about the risks of too much power being concentrated in too few hands. And as passive investing continues to grow, that debate isn't going away anytime soon.
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