Asset manager capitalism: An introduction to its political economy and economic geography

Introduction

Asset management firms are a particular species of investment institution. They provide collective investment vehicles to their clients, namely retail (i.e. household) and institutional investors. The fees paid by those clients are asset managers’ main source of revenue.

Prior to the 1980s, asset management was a modest, peripheral component of the overall business of capitalist finance. Today, by contrast, asset managers are the central, and arguably even dominant, private financial institutions. The term ‘asset manager capitalism’ has been coined to denote this centrality of asset management not just to contemporary capitalist finance but to contemporary capitalism more broadly.

How did this tectonic shift in finance come about? Historically, finance was dominated by banks, which from the seventeenth century onwards were joined by insurers. Although both types of institutions have always carried out asset management functions, those were never the main point of banking or insurance, nor their primary source of revenue (Morecroft, 2017). The earliest – and until this day dominant – ‘pure’ asset management institution is the mutual fund, whose history can be traced back to late seventeenth century Amsterdam (Rouwenhorst, 2005). The British, too, channelled metropolitan savings to far-flung corners of the empire via London-based mutual funds such as the Foreign and Colonial Investment Trust (Chambers and Esteves, 2014).

These were mere preludes, however, to the rise of the modern mutual fund sector over the past half century. While the legislative groundwork had been laid earlier, mutual fund growth gathered steam only when the growth of retirement savings assets took off in the 1990s (Braun, 2021: 278–280). Specifically, the trustees of the pension funds that hold such retirement assets have widely and increasingly outsourced the activity of investing these savings to specialist asset managers (and their mutual funds) rather than directly carrying out that investment themselves. Hence, in large part, the post-1980s surge in mutual funds’ assets under management (AUM).

Although this pattern of asset manager growth fuelled by pension fund growth is a global phenomenon, it is highly concentrated in relatively few advanced economies. Countries with retirement assets in excess of 100% of national economic output include Australia, Canada, Japan, the Netherlands, Switzerland, the UK and the US. Together, these seven countries account for 92% of the total pension assets of the 22 countries with the largest such assets (Thinking Ahead Institute, 2023).

The US dominates the picture. US pension funds account for a remarkable 62% of the total retirement assets of the top-22 countries. Since 1990, total US retirement assets, including collective defined-benefit and individual defined-contribution plans, have increased from $5 trillion to $35 trillion. Meanwhile, U.S. mutual fund assets have increased from $2.5 trillion to $25 trillion. Today, retirement assets account for almost half of the US mutual fund sector’s AUM (Braun, 2022b: 71).

The point of departure for this theme issue is that the rise of asset managers has profound implications for the political economy and economic geography of contemporary capitalism. This emerging asset manager capitalism shows some striking similarities with the early-twentieth century ‘finance capital’ configuration studied by Rudolf Hilferding (Davis, 2008; Maher and Aquanno, 2022). However, the dominant financial institutions then were (private) banks, whereas today they are asset managers, which in turn serve not just retail investors but large – and also often deeply politically embedded – institutional capital pools such as sovereign wealth funds, endowments and foundations as well as the abovementioned pension funds. Thus, while a long-term perspective and awareness of the cyclicality of financial-sector power is indispensable (Arrighi, 1994), the newly dominant position of asset managers should nevertheless be analysed as a historically distinct phenomenon.

In the interest of letting the contributions speak for themselves, rather than imposing its own interpretation, this introductory essay is limited to laying out three overarching and relatively broad analytical perspectives on asset manager capitalism. It does so in the hope of providing scholars of this phenomenon with a meaningful shared framework for studying and conceptualising it.

Firstly, we emphasise the obvious importance of considering the key actors of asset manager capitalism – that is, asset managers – as profit-making firms themselves. For asset management has become an increasingly important sector of capital accumulation in its own right, with its own distinctive geographical configurations (Haberly and Wójcik, 2022). To explore this dimension of asset manager capitalism is to focus on how asset managers generate revenues and profits, where, and on what scale, and on how such activities vary between asset managers of one type or another. In this issue, Matthew Archer as well as Gordon Clark and Adam Dixon examine how and why asset managers harness environmental, social, and governance (ESG) standards to advance their business models. Focusing on the geography of asset manager capitalism, Samuel Weeks explores how Luxembourg established itself as the European centre for the administration of the global business of asset management.

Secondly, we briefly consider how asset managers directly influence the activities of specific other capitalist enterprises. Take, by way of example, private-equity asset management. In this market segment, asset managers and their investment funds take control of companies precisely in order to influence how they are run, and with a view to increasing those companies’ profitability and market value (Appelbaum and Batt, 2014). While the direct influence of asset managers on other firms is especially clear in the private-equity space, it extends well beyond it. In this issue, Franziska Cooiman studies the structural power that venture capital firms wield in the start-up sector, while Albina Gibadullina sheds light on the relative weight of large, diversified asset managers across countries and sectors.

Third and lastly, we suggest that the rise of asset management firms changes the workings of capitalism at large. Indeed, this is perhaps the specific regard in which the concept ‘asset manager capitalism’ is most germane. Asset managers do not just change how individual companies are run: they influence how whole industries are organised and how countries insert themselves into the global monetary and financial system; they lobby governments to implement regulatory and macroeconomic policies that match their preferences. Via these channels, the business of asset management shapes the wider political-economic and economic-geographic contours of contemporary capitalism. In this issue, Bruno Bonizzi and Annina Kaltenbrunner study international financial subordination – a concept the authors have developed elsewhere (Bonizzi et al., 2020) – under conditions of asset manager capitalism.

Asset managers as capitalists

Asset management is big business. The size of the industry is usually measured in terms of the market value of the assets that managers hold on behalf of their clients, namely AUM. Estimates vary – the consultancy McKinsey reported that global AUM reached an all-time high of $126 trillion by the end of 2021 (McKinsey, 2022: 5), while its rival BCG provided a figure of ‘only’ $109 trillion (BCG, 2023: 1) – but the basic point is clear: asset managers control enormous financial resources.

Revenue and profitability figures are another useful way of gauging the size of the sector. McKinsey (2022: 5) estimated that, in 2021, revenues earned by asset managers globally totalled some $526 billion, noting that this was more than double the industry’s global revenue of just 9 years previously. It did not provide a precise estimate for total industry profits, but it reported that profit margins were in the region of 35%–40% (McKinsey, 2022: 7), suggesting that absolute annual profits were somewhere around $200 billion in total.

Such headline figures hide considerable diversity within the asset management sector, however. At one end of the spectrum are so-called ‘conventional’ asset managers, which invest predominantly in publicly-listed financial securities, and which take predominantly ‘long’ positions, meaning they buy assets in the expectation that they will rise in value. Conventional managers control the bulk of global AUM – upwards of 80%, and on some estimates as high as 90%, depending on the definitions used (BCG, 2023; S&P Global Market Intelligence, 2022). ‘Mutual fund’ is the catch-all label typically given to the most common types of fund vehicle that such conventional managers establish in order to pool together and invest their clients’ money.

Increasingly, conventional managers’ largest mutual funds tend to be index funds. These adopt a passive investment stance, generally aiming to replicate the performance of a specified market index – hence the name. The best-known such conventional asset managers are the ‘Big Three’ of BlackRock, State Street and Vanguard (Fichtner et al., 2017), but the category also includes other familiar firms such as Fidelity and Amundi. This group of asset managers is the main focus of the contributions by Kaltenbrunner and Bonizzi, Gibadullina, and Clark and Dixon.

The conventional asset-management business is prototypically high-volume and low-margin (Haberly et al., 2019). Managers generally aim to maximise AUM by appealing to the broadest possible base of investors while competing mainly on price. The management fee paid by investors in index funds averaged just 0.12% of AUM in 2021 (Armour, 2022). Crucially, since they do not charge performance fees, and since they usually invest in every security listed by an index (they are ‘universal’ owners), the revenues and profits earned by conventional asset managers are driven not by movements in the prices of particular stocks, but by the valuation of the overall market (Braun, 2021: 291–292).

To illustrate, take BlackRock, the largest conventional asset manager with AUM around $9 trillion over the course of 2022 (BlackRock, 2023a: 24). Its profits (‘net income’) that year were approximately $5 billion. In other words, to generate a single dollar of annual profit, it needed nearly $2000 of client capital under management. Or, to express the relation another way, its return on AUM was in the region of only 0.05%. As we will see, that is much lower than firms operating in other segments of the asset-management business.

Conventional asset managers are usually distinguished from so-called ‘alternative’ managers. Alternative investment essentially means anything other than the taking of long positions in the public securities markets, and comprises six main segments:

Alternative asset managers – prominent firms include the likes of Apollo, Blackstone, Carlyle and KKR – cater to a narrower client base than conventional asset managers. Among retail investors, only high-net-worth individuals currently have the full range of alternative asset classes available to them via direct investment in alternatives funds, access being regulated because such assets, which on average are much less liquid than publicly-listed securities, are generally considered to bear higher risk (as well as potentially offering higher returns). Instead, it is large institutional asset owners like pension funds and sovereign wealth funds, with virtually infinite investment horizons, that have been in the vanguard of the push into the asset classes offered by alternative asset managers. US university endowments in particular have pioneered the so-called ‘Yale model’, characterised by a high allocation to hedge funds and private equity firms (Lerner et al., 2008).

Furthermore, the management style of alternative asset managers is much more active than that of their conventional counterparts: investing in any of the aforementioned asset classes requires careful research and selection, in contrast to passive index-tracking. Accordingly, annual management fees are multiple times higher, traditionally averaging around 2% of committed capital, compared to the average 0.12% charged by index funds. Last but not least, manager remuneration is much more closely tied to investment performance via performance fees – most commonly an approximate 20% share of realised capital gains.

Thus, relative to AUM, alternatives investment tends to be much more remunerative – albeit also more volatile – than conventional asset management. BCG (2023: 11) has estimated that while alternatives account (on its definition) for only around 20% of the asset management industry’s global AUM, they now deliver around half of global industry revenue, even before performance fees are factored in. Consider – as a specific counterpoint to BlackRock – Blackstone. In 2022, its profits were around $3 billion, while its AUM during the year averaged a little under $1 trillion (Blackstone, 2023: 100, 158). Thus, it needed only around $300 of AUM to generate each dollar of profit (compared with BlackRock’s $2000), and its return on AUM was approximately 0.3% (to BlackRock’s 0.05%).

Geographically, the asset-management business is very much a business of the global North, both in terms of where the leading asset managers are headquartered and where they invest (Haberly and Wójcik, 2022). More than that, it is a heavily US-concentrated business. This spatial patterning comes through strongly in the contributions to this theme issue, and in particular in those by Gibadullina and by Kaltenbrunner and Bonizzi. The former, for example, finds that while the Big Three conventional managers collectively own some 18% of US-listed equity, they hold only 4% of equity listed outside the US; meanwhile, the latter paper shows that for all their efforts to diversify geographically into lower-income ‘emerging markets’, asset managers in practice continue to have a very limited presence in those regions.

But as the paper by Weeks reminds us, asset management and its spatial footprint is not just a matter of where the asset managers themselves are based, where investible capital is sourced from, and where it is invested. Like all capitalist enterprises, asset managers rely upon the provision of an assortment of indispensable (if mundane) support services, without which their ability to circulate and accumulate capital would rapidly cease. Thus, if the world’s leading asset managers are located in New York and London, the corollary to this very visible front-office geography is a largely invisible back-office geography, with the industry’s support infrastructure being concentrated in, and stretched across, the world’s leading tax-friendly offshore financial centres such as the Cayman Islands, Delaware, and – the country studied by Weeks – Luxembourg. Following one of his interviewees, Weeks describes such background services, which include things such as compliance and shareholder distributions, as the ‘plumbing’ of the global asset-management industry.

Asset managers as shapers of other capitalists

The second pivotal dimension of asset manager capitalism concerns the active influence of asset managers on the activities of third-party capitalist enterprises. When they acquire corporate securities of one kind or another, or even extend a simple business loan (as in the case of private debt), asset managers acquire a range of rights and responsibilities vis-à-vis the corporate entity in which they are investing. The exercise of those rights and responsibilities necessarily shapes the operations of the company in question.

This second dimension of asset manager capitalism is linked to the first. That is to say, capital accumulation by asset managers themselves is to varying degrees a function of their capacity to influence how, and with what degree of commercial and financial success, other capitalist firms operate. In approaching the question of how asset-management firms directly influence other capitalist enterprises, it is helpful to consider debt and equity investment separately and, in the case of equity investment, to differentiate between different levels of control.

When asset managers invest in corporate debt instruments, they acquire no responsibilities, and only relatively limited rights – namely, to receive interest payments and, at term, the return of principal. Notably, they do not secure any corporate voting rights. This certainly limits their ability to shape the activities of the relevant debtor in any meaningful way, although in some instances the asset manager may make the advance of credit conditional upon the funds being used for a specified purpose, in which cases of course the asset manager exerts an a priori influence on the debtor’s activities. Furthermore, bonds can be sold, and widespread selling pushes down their price, thus increasing the future borrowing cost for the debtor.

An important exception to this general rule, which does see asset managers frequently wielding a substantial influence on the corporate borrower, pertains to the distressed-debt market. Distressed debt is debt owed by entities experiencing significant financial difficulties. Asset managers invest in such debt partly in view of the high interest rates that it often pays, but partly also in the expectation that some such borrowers will fail, and need to file for bankruptcy (e.g. Wigglesworth and Indap, 2020). When that occurs, if the borrower manages to stay in business through the creation of a new, reorganised company, major debt holders typically play a significant role in determining the financial and operational terms on which it is able to do so. They may also parlay debt into equity holdings. In any event, the point is that a debt investment can eventuate a major role for asset managers in directly influencing the activities of third-party capitalist enterprises.

Nonetheless, such influence is certainly more recognisable and common with equity investment. Here, we can differentiate between different types of asset managers, whose business models afford them different degrees of control over portfolio companies. Asset manager influence is clearest and strongest of all where such investment entails majority ownership and hence formal control. The quintessential case of such formal control is the traditional ‘leveraged buyout’ model of private-equity asset management, which generally involves the acquisition of controlling (majority) equity positions (Appelbaum and Batt, 2014). Indeed, the ability precisely to secure control, and hence to be able to decide exactly what the acquired firm does, is arguably private equity’s chief raison d’être. Asked ‘What do you like about the private equity model?’ in an interview, Stephen Schwarzman, Blackstone’s long-time CEO, for example, responded, ‘You have complete control of a company, rather than buying liquid stock in it’ (Flynn, 2019).

The reason why a private-equity asset manager would want complete control over a company has to do with the importance of performance fees. The more profitably the acquired company can be operated and – in particular – later sold, the greater the financial return not just to the asset manager’s clients, but to the asset manager itself. If an asset manager believes that it knows better than the executives of an acquired company how the company should be operated in order to maximise profits and market value (for instance, through wage cuts or layoffs), it will not hesitate to direct the executives to change course accordingly – nor, indeed, to dispense with those executives’ services if they fail to do so. In short, for asset managers, control is key to maximising other firms’ profitability in the service ultimately of maximising their own.

On the face of things, the influence wielded by asset managers would appear less significant in the case of venture-capital (VC) investment in early-stage companies, which ordinarily involves the purchase of minority (non-control) equity stakes, thus limiting the ability unilaterally to impose major strategic changes. However, Cooiman’s contribution to this theme issue shows that despite not usually holding majority positions in investee companies, some VC firms nevertheless are widely able to shape how these companies operate. This occurs through legal channels – notably preferred shareholder rights, board seats, and payout conditionalities – but also through the direct participation of VC firms, which have carved out a consultant role for themselves, leveraging their expertise and networks.

In the realm of equity investment, control over portfolio companies is weakest for conventional asset managers holding shares in publicly listed companies. These hold highly diversified portfolios that are designed to either replicate – in the case of index funds – or hue closely to indices such as the S&P500 or the MSCI World. ¹ The flipside of this diversification is that stakes in individual companies tend to be small. The exception to this rule is the world’s largest asset managers, namely the aforementioned Big-3, which, by virtue of their sheer size, hold significant stakes despite being fully diversified. As Gibadullina shows in her contribution, those stakes are particularly large in the US, where the joint holdings of the Big-3 often exceed 20%. The footprint of the Big-3 is smaller but still very significant in the UK and a handful of other advanced economies.

Even in the case of the US, however, the fact that Big-3 holdings are so large does not imply that they have taken the reins in US corporate governance. The reasons for why they have not done so, and the question of whether they may try to do so in the future, are debated in the literature, as well as in this issue (Baines and Hager, 2023; Bebchuk et al., 2017; Braun, 2022a; Condon, 2020, 2022; Fichtner and Heemskerk, 2020). From our perspective, one major reason why conventional asset managers seemingly punch below their weight in corporate governance is that their business model makes corporate governance a sideshow. Their primary mission is to attract money to manage. Since competition among index fund providers in particular takes the form principally of price competition, and since stewardship teams cost money, corporate governance engagement is generally not a profit-generating activity for asset managers.

Another reason why the Big-3 asset managers are less of a force in corporate governance than one might expect is that despite their similarities, they do not vote, nor engage, as a united block. Besides legal obstacles preventing shareholder coordination, asset managers may also diverge from their immediate competitors’ voting or engagement behaviour in order to differentiate themselves. In short, the oft-cited figures for the Big-3′s cumulative holdings represent something of a red herring, even as corporate governance scholars conventionally regard a 20% holding as the upper threshold for minority control. The Big-3 are a big three, not a big one. Moreover, each holds its equity stakes through an array of different investment funds, including actively managed funds, the individual managers of which may not be aligned with one another on matters of corporate governance.

Corporate governance interventions that increase the stock market valuation of any particular firm primarily benefit active investors who are overweight in that particular stock. An exception to this rule are corporate governance interventions that increase stock valuations across the board, which do increase conventional asset manager revenues – clients pay the same fee, but multiplied with the increased market value of their assets in the respective fund.

Asset manager capitalism is a topsy-turvy world, however, and the observation that asset managers have little to gain from trying to influence portfolio companies on the asset side of their balance sheet does not mean that corporate governance engagement is entirely fruitless for them. The benefits, instead, register disproportionately on the liability side: performative stewardship can be seen as a marketing activity by which asset managers signal to clients that they are acting as dedicated stewards of clients’ capital. The annual letters Larry Fink, the long-time CEO of BlackRock, sends out to portfolio company CEOs, are a prime example of such performative stewardship. Their material impact on how CEOs run their companies can safely be assumed to be negligible, but once a year the business media report extensively on BlackRock’s (supposed) corporate governance priorities.

The power of asset managers to shape the economic and political system

If asset management has become an important channel of capital accumulation in its own right, and if asset managers shape the economic activities of other corporate actors, then by necessity asset managers are also shapers of capitalism at large. These broader effects are difficult to measure, however, in part because it is still early days in the ‘age of asset management’ (Haldane, 2014), but also because those effects vary across jurisdictions and varieties of capitalism (Voss, 2023).

Take, for instance, the theory of ‘universal ownership’, according to which highly diversified asset managers, by virtue of their exposure to the entire universe of listed companies, should seek to maximise profits at the level of the economy as a whole. Such an approach should, in principle, resemble that of a social planner in that it requires the internalisation of negative external effects arising from the behaviour of individual corporations. A universal owner holding the eminently reasonable belief that breaching the global greenhouse gas emission limits implied by the 1.5-degree Paris goal would have negative consequences for shareholder returns should engage proactively in corporate governance to enforce decarbonisation across its (economy-wide) portfolio (Christophers, 2019; Condon, 2020; Fichtner and Heemskerk, 2020). But despite the fact that the macroeconomic and indeed legal case for ‘universal owners’ to enforce environmental sustainability seems ironclad, it is safe to say that such enforcement has not happened, nor even been meaningfully ventured.

Clearly, asset managers do shape national and supranational political economies in myriad different ways. Think of it like this. Capitalism is rooted in private ownership; its history has been in significant part a history of accumulation predicated upon dispossession of non-capitalist (for example, public or communal) forms of ownership. In recent decades, asset managers have become the primary force in determining where, when, on what terms and to whose relative advantage and disadvantage capital available for taking ownership is channelled into the actual ownership of a proliferating variety of assets that include, but are now far from limited to, productive capitalist enterprises. In effect, the asset management industry is the central nervous system of contemporary capitalist society.

In this short introduction, we confine our specific comments on the workings and implications of this central nervous system to the relationship between asset managers and the state, on the grounds that this is arguably both the most important and the most under-researched aspect of asset manager capitalism. Here, the distinction between three types of financial-sector power can be helpful. As do other financial firms, asset managers wield structural power, infrastructural power, and instrumental power.

Structural power is associated with the logic of ‘exit’ – the ability of capitalists to (threaten to) withhold investment, with negative consequences for growth and employment, and thus for a government’s prospects to remain in power. Domestically, banks have traditionally been in the best position to implement such an investment strike. Internationally, however, asset managers are the quintessential ‘portfolio investors’ that move money in and out of countries, or entire regions. This phenomenon, which has been discussed under the rubrics of the ‘global financial cycle’ and ‘international financial subordination’ (Rey, 2015; Alami et al., 2023), severely constrains the policy space for developing and emerging market economies in particular, who see their exchange and interest rates fluctuate in ways that have more to do with global asset managers’ search for yield in reaction to U.S. monetary policy decisions than with their own governments’ policy decisions (Naqvi, 2019).

Structural power is at its most pronounced in the sovereign bond market, where asset managers, together with rating agencies and index providers, act as the arbiters of creditworthiness, solvency, and, ultimately, sovereignty (Petry et al., 2021; Roos, 2019). Here, the effectiveness of the threat of exit has, over the past few decades, been enhanced by the rise of so-called ‘vulture funds’. These hedge-fund managers make a business model of buying, at steeply discounted prices, sovereign debt that is either in distress or in default, with the goal of getting repaid the principal, or at least a larger proportion of it than the prevailing market expectation. Litigation in foreign – from the perspective of the debtor country – courts is part and parcel of this strategy, often with the goal of enforcing asset seizures (Potts, 2024). The profitability of this investment strategy illustrates the continuing importance of the threat of ‘exit’ as a source of the financial sector’s structural power.

Asset managers also enjoy considerable infrastructural power vis-à-vis state actors (Braun, 2020). By this, we mean the growing dependence of governments on asset managers for the design and implementation of their own policies. The leverage that asset managers enjoy in this regard derives from numerous sources, including their expertise, risk management systems, and global client lists. The stand-out entity in terms of such infrastructural power is BlackRock, which has emerged as a latter-day J.P. Morgan, sought after by governments around the world. Amidst the global financial crisis of 2008, for example, BlackRock was the U.S. government’s choice to manage the three so-called Maiden Lane vehicles that it created to hold, and eventually sell, assets previously held by the insurer AIG and the bank Bear Stearns. Since then, BlackRock has been hired by governments around the world, ‘advising on over $20 trillion in loans, securities and derivatives exposures and conducting stress-testing on systemically important financial institutions and entire domestic banking systems’ (BlackRock, 2023b). In March 2020, during the first wave of the Covid-19 pandemic, the Fed again retained BlackRock to help it buy corporate debt and commercial mortgage-backed securities (Tett, 2020).

A very similar mechanism is at play in the context of the growing push by alternative asset managers into housing and infrastructure assets, typically using investment vehicles that replicate private-equity fund structures and remuneration mechanisms. Around the world, governments have increasingly been persuaded – or in some cases have persuaded themselves – that the massive need for investment in the construction and retrofitting of housing and infrastructure, not least for climate mitigation and adaptation purposes, is not something that should be met through public-sector borrowing, investment and asset ownership and operation. Instead, governments in countries of both global South and North are looking to the private sector in general, and asset managers in particular, to carry out such investment. The result is that the state is more and more beholden to and dependent on asset managers for the delivery of basic public goods such as shelter, electricity, or water (Christophers, 2023). This gives such asset managers profound infrastructural power: state actors often cannot afford to act against the interest of the asset managers in question, led by the likes of Blackstone, Canada’s Brookfield Asset Management, and Australia’s Macquarie.

Finally, and not unrelatedly, asset managers also engage in direct lobbying of governments, thus wielding instrumental power. Again, BlackRock stands out for its practice of hiring very senior former central bank officials, including the former chairman, deputy governor, and vice-chairman of the Swiss National Bank, the Bank of Canada, and the Federal Reserve, respectively (Braun, 2021: 292). Being represented by such high-profile former central bankers certainly constitutes an asset in regulatory battles. When global regulators debated whether the largest asset managers should, alongside their peers in global banking, be designated ‘systemically important’ – which would have brought them under a more stringent regulatory regime, the EU investment fund industry was, in the words of one insider interviewed by James and Quaglia (2023: 354), ‘‘very vocal’ in lobbying national and EU securities regulators to “pass the message on to central banks”’. In the end, asset managers successfully prevented being classified as global systemically important financial institutions. Increasingly, asset managers not only lobby defensively, to ward off regulations, but also seek to actively shape the broader regulatory and political landscape. For instance, asset management professionals are deeply embedded in regulatory networks in the field of European sustainable finance (Seabrooke and Stenström, 2023). More notoriously, hedge fund and private equity executives actively supported the British campaign for Brexit, expecting to benefit from more lenient regulation and taxation outside of the EU (Benquet and Bourgeron, 2022).

All of this raises an obvious question: What are asset managers’ policy preferences? An important answer to this question has been given by Daniela Gabor, who has argued that the investment preferences of large institutional capital pools have shaped a global policy regime that is geared towards making the world safe for institutional capital. Under this ‘Wall Street consensus’, states use their fiscal, monetary, and regulatory policy levers to ‘derisk’ assets in order to make their risk-return profiles match the investment needs of institutional capital pools and their asset managers (Gabor, 2021). As shown by Bonizzi and Kaltenbrunner in this issue, this logic plays out particularly visibly in emerging market economies, whose financially subordinated status forces them to abide by the norms and expectations of asset managers, index providers, and rating agencies (Hardie, 2012; Petry et al., 2021).

Another high-priority policy preference for asset managers is low interest rates. Other things being equal, a lowering of the central bank’s policy rate inflates asset valuations, thus directly increasing asset managers’ fee revenue. At the same time, lower rates reduce financing costs for highly leveraged asset managers, such as hedge funds and private equity firms. In their preference for low interest rates, asset managers diverge diametrically from banks, whose lending-based business model makes them the core constituency for a hawkish, anti-inflationary monetary policy stance (Braun, 2021: 292). Arguably most important, however, is pension policy. Where interest rate policy can only help inflate the existing cake of assets under management, pension policy is the lever that has made – and still makes – the cake significantly bigger.

Conclusion

We have presented three analytical lenses through which to study the political economy and economic geography of asset manager capitalism: asset managers as capitalist enterprises in their own right; as shapers of other capitalists; and as shapers of the broader economic and political system. Applying these lenses in different ways, the contributions to this issue improve our understanding of the phenomenon while, at the same time, raising new questions for future research.

From a business model perspective, the success and continuing growth of specific types of asset managers raises important questions. Are there limits to the growth of index-based investing? Could the introduction of a public (i.e., state-owned) option for asset management counter the power of private asset managers (Palladino, 2023)? Another is whether alternative asset managers will increasingly compete with exchanges, trading unlisted corporate assets among themselves. This would have far-reaching implications also for the shape of the broader economic system, where deep and liquid ‘public’ capital markets have long been considered the crowning achievement of financial development.

From a corporate governance perspective, one key question is whether in a shareholder landscape increasingly dominated by index-based shareholders, asset managers will be able to hold on to the powers and privileges originally devised for, and delegated to, very different types of shareholders. In a green transition world in which state policies increasingly shape the direction of economic development in key sectors, the argument that shareholders should be empowered so as to guarantee efficient capital allocation looks weakened. Their political position has become particularly tenuous in the United States, where public asset managers have come under fire both from carbon coalitions and from climate coalitions. Big questions such as these will only gain in importance because – and this is the one prediction we are happy to offer – asset managers are here to stay.