BlackRock, the world’s largest asset manager, will offer some of its institutional fund investors a choice of how their shares are allocated at company shareholders’ meetings – a move that will likely put the pressure on rivals to give asset owners more voice in the process.
In a letter to clients, seen by Financial news, BlackRock said institutional investors in certain index strategies will be able to choose how they participate in proxy voting – the process by which shareholders, often large investors such as pension funds, delegate the voting process.
The changes, which will take effect from January in time for the 2022 proxy voting season, will impact roughly 40% of the $ 4.8 billion BlackRock oversees on index stock assets. At this time, only clients with institutional segregated accounts around the world and those with certain mutual funds in the US and UK will be able to use the different options.
Large fund investors often rely on research conducted by the internal management teams of asset managers to vote on their behalf at shareholder meetings, covering a range of topics such as executive compensation, membership of the Board of Directors and resolutions on climate change.
But some large investors are demanding more votes in the process, especially as the voting power held by some of the world’s largest index fund providers has increased dramatically.
“There is a huge battle looming for asset owners who are frustrated with not being able to vote the way they want in mutual funds,” said Tom Powdrill, chief stewardship officer at Pirc, who advises major investors on proxy voting.
He said BlackRock’s move would put pressure on other asset managers with institutional clients to follow suit.
“This will become a more acute problem due to the growth in assets under management with passive managers,” said Powdrill.
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A report released by Boston University School of Law in 2019 found that BlackRock, Vanguard and State Street – three of the world’s largest index fund providers overseeing trillions of assets – collectively held an average of around 25% votes in S&P 500 companies.
As part of the changes, which BlackRock said took “several years” to implement, institutional clients will be offered several voting choices.
The first is for them to vote by proxy in accordance with their own policy and to do so using their own voting infrastructure.
They can also choose from a menu of third party proxy voting policies and vote using BlackRock’s voting technology.
Meanwhile, clients with separately managed accounts will be able to vote directly on certain resolutions or companies using BlackRock’s voting system.
For clients who wish to maintain the status quo, BlackRock’s investment management team will continue to vote on their behalf.
The asset manager said that in the 12 months leading up to June 30, its investment management team voted at more than 17,000 shareholder meetings, with more than 165,000 votes in 71 different markets.
“These options are designed to allow you to have more of a say in the proxy voting, if that is important to you,” BlackRock said in the letter to the client.
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“This capability of BlackRock responds to our clients’ growing interest in investment management. It also reflects broader industry dynamics, such as the impact of advancing technology on investing – and with it, the possibility of more personalized approaches to your investments and how you invest them. manage.
The changes come after the U.S. Securities and Exchange Commission suggested asset managers disclose more details about how they vote on behalf of investors.
The SEC’s proposals, reported by the WSJ in September, also aim to help investors identify proxy voting issues and compare fund voting patterns.
BlackRock said it is “exploring all options” to extend the choice of proxy voting to more of its investors, including those in ETFs, index mutual funds and other products.
“This initiative will require the cooperation of additional partners in the investment and proxy voting ecosystem. In some cases, this will also require a change in the regulatory and operational system, ”he said.
To contact the author of this story with comments or news, email David Ricketts