#265
THE FRANKENFUNDS
John Bogle, the founder of Vanguard and inventor of the index fund (and, in essence, modern “passive” investing), is sounding the alarm on his own creation. Like Frankenstein, the index fund has taken on a life of its own that its creator never anticipated.
Index funds that track the market have grown at a tremendous pace – they represent over $6 trillion and own 35% of the U.S. stock market. The trend is unlikely to abate, and these funds may eventually represent 50% or more of outstanding corporate shares. In that scenario, the “big three” (Vanguard, BlackRock, and State Street) alone might own more than 30% of the vote.
The fear shared by Bogle and a number of academics is that a select group of individuals will control the voting power in America’s public companies. The increasing control of index funds is further magnified by the fact that most average retail investors don’t understand the voting process – nor are they typically compelled to vote their shares.
Bogle and others are calling for legislative measures to mitigate the risk – including enhanced fiduciary standards that would more explicitly restrict index funds to vote in the interest of their shareholders.
No matter how the problem is addressed, one thing is for sure – we will need to find a way to keep the FrankenFunds in check!
Portfolio News
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The Frankenfunds
Bogle sounds a warning on index funds - Index funds have grown at tremendous pace, now totaling over $6 trillion and representing more than 17% of total stock market value. Including actively managed funds, mutual fund managers represent more than 35% of the shares of U.S corporations. Read more
Industry News
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Fintech seeks untapped riches in b2b - In Europe, b2b fintech start-ups have attracted less investment than their consumer-focused rivals, but the gap is starting to close. In 2015, b2b fintechs raised $660m of capital, accounting for 34% of total funding, but last year, those figures had risen to $948m and 46%. Read more
Record mobile sales hit $2b on biggest Black Friday ever - US consumers purchased more than $2 billion of goods straight from their phones on Black Friday. Read more
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Moody's is going to start building the risk of a business-ending hack into its credit ratings - Moody's is planning to complement its credit ratings business with a rating on risk from cyberattacks. The initiative may help investors who often struggle the potential impact of adverse cybersecurity incidents. Read more
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Select Financings
Bright Health - Minneapolis based health insurance startup has raised a $200m Series C from Bessemer and other investors. Read more
Flipside Crypto - Florida based crypto network activity tracker has raised $4.5m Series Seed capital from DCG, Coinbase Ventures, and Castle Island Ventures. Read more
LearnLux - Boston based educational fintech startup has raised $2m of Series Seed funding from Sound Ventures (Ashton Kutcher) and Marc Benioff. Read more
LoanStreet - New York based loan origination and syndication platform has raised a $6.5m Series A led by Valar Ventures. Read more
MondoBrain - Paris and Washington D.C. based business decisioning platform has raised $13.3m in venture financing from Japia. Read more
Numerated - Boston based lending-as-a-service and marketing platform for community and regional banks has raised an additional $8m in financing led by Venrock, FIS, and Fintop Capital. Read more
Oriente - Hong Kong based mobile lending and financial inclusion platform has raised $105m in equity capital from Berjaya Group, JG Summit, and Sinar Mas. The round ranks as one of the largest initial funding rounds by a startup in Asia. Read more
Securitize - California based tokenized securities platform has raised a $12.75m Series A led by Blockchain Capital. Read more
Voyager - Philippines based mobile wallet provider has raised $215m from Tencent and IFC. Read more
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