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Less than 18 percent of global stocks owned by index investors: BlackRock

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10/04/2017 | 12:31am CEST
The company logo and trading information for BlackRock is displayed on a screen on the floor of the NYSE

NEW YORK (Reuters) - Less than 18 percent of the global stock market is owned by index-tracking investors, according to a new estimate from BlackRock Inc (>> BlackRock), as it suggested that passive investing plays only a limited role in setting equity prices.

NEW YORK (Reuters) - Less than 18 percent of the global stock market is owned by index-tracking investors, according to a new estimate from BlackRock Inc (>> BlackRock), as it suggested that passive investing plays only a limited role in setting equity prices.

The estimate on Tuesday showed that $11.9 trillion in stocks were owned by mutual funds, exchange-traded funds, institutional accounts and private investors that track an index. That accounts for 17.5 percent of the $67.9 trillion in global equity market capitalization, according to the data.

Stocks in actively managed hedge funds, mutual funds and institutional accounts total $17.4 trillion, 25.6 percent of the global equity market cap, according to the report.

The remaining 57 percent are assets held by governments, pension funds, insurers or corporations. Such holdings are not overseen by an asset manager and do not track an index.

The data comes as debate rages about the rise of funds that attempt to match the market at low cost rather than focus on beating the market.

BlackRock - the world's largest manager of ETFs, most of which are passive - released its data in a report disputing what its vice chairman, Barbara Novick, called "misinterpretations of information."

BlackRock said active managers drive prices in the stock market, with $22 dollars by active stockpickers for every $1 traded by index funds, according to the firm's data.

Bank of America Corp's (>> Bank of America) research unit said earlier this year that the stocks most held by passive investors have seen wider price swings. Their report pegged passive ownership of U.S. equity funds at 37 percent, up from 19 percent in 2009, though that analysis was limited to funds and did not include an estimate of privately held assets.

Oaktree Capital Management LP Co-Chairman Howard Marks told clients this summer that active managers' underperformance could be temporary and that ETFs' "promise of liquidity has yet to be tested in a major bear market."

A report last year by broker-dealer Sanford C. Bernstein & Co LLC described passive investing as promoting a system of capital allocation worse than both capitalism and Marxism in which shares in the biggest companies are bought blindly.

This year alone, U.S.-based equity ETFs have gathered $214 billion and index mutual funds attracted another $111 billion, while actively managed funds bled $124 billion in withdrawals, according to Thomson Reuters' Lipper research unit. More value is exchanged daily in the top ETFs like the SPDR S&P 500 ETF (>> SPDR S&P 500 ETF Trust) and iShares Russell 2000 ETF (>> iShares Russell 2000 Index (ETF)) than in most stocks.

(Reporting by Trevor Hunnicutt; editing by Jennifer Ablan and Tom Brown)

By Trevor Hunnicutt

Stocks mentioned in the article
ChangeLast1st jan.
BANK OF AMERICA -1.53% 29.67 Delayed Quote.0.51%
BLACKROCK -1.17% 504.89 Delayed Quote.-0.56%
DJ INDUSTRIAL -0.53% 25064.5 Delayed Quote.1.40%
ISHARES RUSSELL 2000 INDEX (ETF) 0.00%-End-of-day quote.0.00%
NASDAQ 100 -0.51% 7352.3575 Delayed Quote.15.54%
NASDAQ COMP. -0.37% 7825.2958 Delayed Quote.13.78%
S&P 500 -0.40% 2804.49 Real-time Quote.5.31%
SPDR S&P 500 ETF TRUST 0.00%-End-of-day quote.0.00%
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Sales 2018 14 689 M
EBIT 2018 5 850 M
Net income 2018 4 464 M
Finance 2018 5 925 M
Yield 2018 2,37%
P/E ratio 2018 18,30
P/E ratio 2019 16,78
EV / Sales 2018 5,17x
EV / Sales 2019 4,71x
Capitalization 81 823 M
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BlackRock Technical Analysis Chart | BLK | US09247X1019 | 4-Traders
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Spread / Average Target 17%
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NameTitle
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Robert L. Goldstein Chief Operating Officer & Senior Managing Director
Gary S. Shedlin Chief Financial Officer & Senior Managing Director
Derek N. Stein Global Head-Business Operations & Technology
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