Money Managers Anxious Over Potential Future Regulation

The U.S. government is becoming suspicious of the effect that common ownership has on anticompetitive behavior.

Asset managers in the U.S. are working to avoid future regulation from the U.S. government.

Companies that are working with U.S. officials to avoid future regulation include BlackRock and Vanguard Group. This proactive effort at avoiding regulation comes at a time when the finance industry has been under pressure for practices that might harm consumers.

The current practice under scrutiny is common ownership. Essentially asset managers have about $13 trillion in investor money. This means that these funds when invested result in ownership of multiple companies within any given sector.

The worry is that investors having stakes in competing companies in a sector allows for collaboration that benefits investors rather than consumers. In effect, companies start acting in anti-competitive ways rather trying to beat each other out for the lowest price.

One particular academic paper started the discussion on common ownership. The paper evaluated the rise in airline prices and emphasized that airlines that were competitors but had investors in common raised their prices in sync.

The paper has been criticized for its methodology. However, it has started a conversation that has prompted action from the largest money managers in the country.

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