Testimony on Passive Index Funds and Shareholder Voting

Summary

Lindsey Keljo, Managing Director, Head of Asset Management Group & Associate General Counsel of SIFMA, delivered testimony before the SEC Investor Advisory Committee meeting on Passive Index Funds and Shareholder Voting.

Excerpt

Good morning, and thank you to the Investor Advisory Committee, the Investor as Owner Subcommittee, and James Copland for the opportunity to participate in today’s discussion.

I am Lindsey Keljo, Head of the Asset Management Group at SIFMA (SIFMA AMG). SIFMA AMG represents the asset management community, whose members serve millions of investors through mutual funds, ETFs, retirement plans, institutional accounts, and other investment vehicles.

I have been asked to discuss the rise of index investing and increased ownership levels from an industry perspective. To understand the current debate, I think it is helpful to begin with a simple observation: the rise of index investing and increased ownership levels are not separate phenomena. They are closely related developments that stem from one underlying reality—investors increasingly choose professionally managed, low-cost, diversified investment products as a preferred way to participate in the capital markets. As a result, investors have benefited, and the capital markets have benefited as well.

Over the last fifteen years, the growth has been dramatic. According to the Investment Company Institute (ICI), index mutual funds and ETFs grew from approximately 19 percent of fund assets in 2010 to approximately 52 percent by the end of 2025. Between 2016 and 2025 alone, index domestic equity mutual funds and ETFs received approximately $2.9 trillion in net new cash flows and reinvested dividends.

This growth was not the result of a regulatory mandate or a policy decision that a handful of firms should become large shareholders. Rather, it reflected millions of individual decisions by investors seeking diversification, lower costs, transparency, and long-term investment performance.

Discussions about passive investing often begin at the end of the story rather than at the beginning. We observe that ownership is more concentrated among a relatively small number of asset managers and ask whether that creates governance concerns. Perhaps that is an understandable question. But it is important to recognize that this development emerged as a byproduct of investor choice and the growth of pooled investment vehicles.  And, it’s also important to recognize that the assets belong to those end investors, not the asset managers.