Snap, crackle, monopoly: Do you invest in breakfast?
Just three companies — Vanguard, BlackRock, and State Street Global Advisors — control over $16 trillion of assets in their massive proprietary funds.1 With so much money under their control, it's common for these companies (as well as other big financial players in the industry) to own large stakes of multiple competing companies in the same industry.
Retirement's big, yeah, yeah, yeah ...
In a recent NPR article, a Yale economist/kids cereal aficionado and his cohorts decided to study whether large companies with common ownership have the effect of creating a "stealth monopoly." They decided to test their hypothesis using cereal companies because the aforementioned big three investment companies each own about 5% of each of the big four cereal companies: General Mills, Post, Quaker Oats, and Kellogg's.
The gist of their hypothesis was to determine whether our collective retirement savings through our 401(k)s, pensions, IRAs, etc. — which are heavily invested in mutual funds managed by the Vanguard, BlackRock, and State Street Global Advisors of the world — had the effect of helping create a behind-the-scenes monopoly that raises the prices of goods and services we consume, such as, you guessed it, breakfast cereal.
Mikey likes it!
To this author's delight, the study did not find any evidence of price effects of common ownership in the breakfast cereal market. Now if I could only figure out how to corner the frozen concentrated orange juice market, I can retire early from the tax game.