Law Commons^™

'Public' Mutual Funds, Jeff Schwartz

Utah Law Faculty Scholarship

The concentration of public equity in the hands of just a few mutual-fund complexes has raised concerns about whether these institutions take seriously the stewardship obligations that come with the significant voting power that they have amassed. One leading theory, the agency-cost theory, is that the major fund complexes, all of which specialize in passively managed funds, lack the incentive to adequately police corporate managers on behalf of fund shareholders. Others counter that competition for mutual-fund investors provides sufficient incentive for satisfactory oversight.

I argue that neither agency costs nor competitive incentives are the primary driver of stewardship behavior. Rather, …