The Big Three: BlackRock, Vanguard, State Street

Three Firms, One-Quarter of Corporate America

When you recommend an S&P 500 index fund to a client, you are almost certainly placing their money with one of three companies. BlackRock, Vanguard, and State Street Global Advisors collectively manage over $30 trillion in assets and control roughly 74 percent of the U.S. equity ETF market. Together, they constitute the largest shareholder in approximately 88 percent of S&P 500 companies, casting about one-quarter of all votes at shareholder meetings for those firms.

That level of concentration is unprecedented in the history of capital markets. And it raises questions that most advisors have never had to consider: What happens when the firms that manage your clients’ passive investments also hold enough voting power to shape the companies those funds own? How did three asset managers accumulate this position? And what does it mean for advisors trying to make informed product decisions?

How Each Firm Built Its Position

The Big Three share a common tailwind (the multi-decade shift from active to passive management), but each arrived at its current position through a distinct strategy. Understanding those differences matters, because they produce different product characteristics, cost structures, and potential risks.

BlackRock: The Acquirer

BlackRock was founded in 1988 as a fixed-income risk management firm. Its transformation into the world’s largest asset manager came primarily through acquisition rather than organic fund growth. The pivotal deal was the 2009 purchase of Barclays Global Investors, which brought the iShares ETF brand into BlackRock’s portfolio. That single acquisition made BlackRock the dominant ETF sponsor overnight.

As of year-end 2025, BlackRock managed approximately $14 trillion in total assets, with iShares ETF assets exceeding $5 trillion. The firm’s 2025 results were record-breaking: $698 billion in net new money flowed in during the year, including $342 billion in the fourth quarter alone. Equity assets reached $7.8 trillion, fixed income $3.3 trillion, and multi-asset strategies $1.2 trillion.

BlackRock’s competitive position rests on breadth. The iShares lineup includes more than 1,600 ETFs globally, spanning domestic equity, international, fixed income, sector, commodity, and specialty categories. That breadth creates a network effect: advisors who use iShares products for core allocations tend to stay within the platform for satellite positions, because the tools, reporting, and trading relationships are already established. BlackRock reinforces this with Aladdin, its institutional risk analytics platform that processes trillions of dollars in portfolio risk assessments for hundreds of institutional clients. Aladdin gives BlackRock a data and technology moat that extends well beyond fund management.

The firm has also moved aggressively into private markets. In 2025, BlackRock’s alternative asset base grew from $455 billion to $676 billion, and the firm has set a target of raising $400 billion in private markets capital by 2030. CEO Larry Fink has described 2026 as the first full year of BlackRock operating as a “unified platform” that blends traditional index investing with private credit and infrastructure.

For advisors, the practical takeaway: BlackRock’s scale drives extremely competitive expense ratios and liquidity on its core products, while its breadth makes it possible to build an entire portfolio within a single platform. The risk is concentration. When one firm manages this much of the market, its internal decisions about product design, index selection, and proxy voting carry outsized consequences for every client who holds its funds.

Vanguard: The Disruptor That Became the Establishment

Vanguard’s story is fundamentally different from BlackRock’s because of a structural decision made at the firm’s founding. When John Bogle launched Vanguard in 1975, he organized it as a mutual company owned by its funds, which in turn are owned by their shareholders. Vanguard has no external stockholders. Its profits are returned to fund investors through lower expense ratios. This structure creates a permanent cost advantage: Vanguard does not need to generate returns for outside shareholders, so it can operate its funds at or near cost.

As of the most recent disclosures, Vanguard managed approximately $10 to $12 trillion in global assets, depending on the reporting date and methodology. The firm’s average expense ratio across all products has fallen to 0.06 percent, a figure that would have seemed implausible a generation ago. Vanguard’s Total Stock Market Index Fund alone holds over $1.7 trillion in assets across its mutual fund and ETF share classes.

Vanguard’s second structural innovation was the ETF share class patent, originally filed in 2001 and granted in 2003. The patent allowed Vanguard to attach an ETF share class to an existing index mutual fund, so both share classes access the same underlying portfolio. The ETF share class’s in-kind creation and redemption mechanism allowed managers to purge appreciated securities from the fund without triggering taxable events, a benefit that extended to mutual fund shareholders as well. This structure gave Vanguard index funds a tax efficiency advantage that no competitor could replicate for two decades.

That patent expired in May 2023, and the competitive implications are still unfolding. Dimensional Fund Advisors, Fidelity, and more than 30 other fund providers have filed with the SEC to offer similar ETF-as-share-class structures. BlackRock and State Street submitted their own applications in late 2024. If regulators approve these filings broadly, the patent’s expiration could represent the most significant structural change in the fund industry since the first ETF launched in 1993. Vanguard’s cost advantage from ownership structure remains intact, but its tax efficiency edge from the ETF share class may gradually narrow.

For advisors, the practical takeaway: Vanguard’s ownership structure means its incentives are permanently aligned with shareholders in a way that for-profit competitors cannot fully replicate. The lowest cost is not always the only consideration (trading infrastructure, product range, and platform integration matter too), but when cost is the primary variable, Vanguard’s structural position is difficult to beat.

State Street: The Pioneer That Competes on Liquidity

State Street Global Advisors occupies a different position than its two larger rivals. The firm launched the SPDR S&P 500 ETF Trust (SPY) in January 1993, creating the first U.S. exchange-traded fund and establishing what would become a $13 trillion industry. SPY remains the most heavily traded ETF in the world, with daily volume often exceeding $28 billion.

Yet in assets under management, State Street trails both BlackRock and Vanguard by a wide margin. At year-end 2025, State Street managed approximately $5.7 trillion in total AUM (a record for the firm), compared to BlackRock’s $14 trillion and Vanguard’s approximately $12 trillion. State Street’s SPDR ETF family holds roughly $1.7 trillion across all products.

The gap reflects a strategic trade-off. SPY itself illustrates the issue: it is structured as a unit investment trust (a legacy of its 1993 launch), which prevents it from reinvesting dividends, lending securities, or using sampling techniques. Vanguard’s VOO and BlackRock’s IVV, both organized as open-end funds, can do all of these things, generating slightly better returns for long-term holders. Since 2020, both VOO and IVV have surpassed SPY in total assets under management. SPY retains its dominance in trading volume, making it the preferred tool for institutional traders and tactical allocators, but buy-and-hold investors increasingly choose the lower-cost, more structurally efficient alternatives.

State Street’s broader strategic strength lies in its Select Sector SPDR lineup, which breaks the S&P 500 into 11 sector-specific ETFs. These products are widely used for tactical sector rotation and hedging. The firm also operates a massive custody and administration business: $53.8 trillion in assets under custody and/or administration at year-end 2025, roughly ten times its AUM figure. That custody business generates a stable revenue base that funds do not need to subsidize.

For advisors, the practical takeaway: State Street products serve a specific role. SPY’s unmatched liquidity makes it ideal for large trades, options strategies, and short-term tactical positions where execution quality matters more than a few basis points in expense ratio. For long-term core allocations, the firm’s structural disadvantages in its flagship product make VOO and IVV more compelling for most clients.

The Engine Behind All Three: Passive Investing’s Structural Advantages

The Big Three did not grow to their current scale because of superior stock picking. They grew because passive investing has structural cost and tax advantages that compound relentlessly over time.

The arithmetic is simple, and it was articulated by Nobel laureate William Sharpe in 1991: before costs, the return of all investors collectively must equal the market return. For every dollar that outperforms, another dollar must underperform. After costs, the average actively managed dollar must trail the average passively managed dollar by precisely the amount of those costs.

Over 15-year periods, approximately 90 percent of active managers underperform their benchmarks across most categories. The data is worst in efficient market segments like U.S. large-cap equity, where the S&P 500 has beaten most stock pickers for decades running.

This arithmetic creates a self-reinforcing cycle that benefits the Big Three. As passive fund flows accelerate, the largest index fund sponsors capture a disproportionate share, because their existing scale generates tighter bid-ask spreads, lower tracking error, and lower expense ratios than smaller competitors can offer. Larger funds attract more assets, which improve those metrics further, which attract more assets. That virtuous cycle has proven extremely difficult for new entrants to break.

Consider the expense ratio compression that scale has produced. Vanguard’s S&P 500 ETF (VOO) carries an expense ratio of 0.03 percent, meaning an investor with $100,000 pays just $30 per year in management fees. BlackRock’s equivalent (IVV) charges 0.03 percent. State Street’s SPY charges 0.09 percent, more than three times the fee, yet still trivial in absolute terms. At these levels, the traditional fund expense conversation has shifted: the difference between 0.03 percent and 0.09 percent on a $500,000 portfolio is $300 per year. It is real money over decades, but it is no longer the primary differentiator it was when active funds charged 1.5 percent.

The real competitive moat is no longer the fee itself but the infrastructure: trading volume, options chains, securities lending revenue, institutional relationships, and platform integration. These are advantages that favor incumbents and make the Big Three’s market position increasingly durable.

What the Concentration Means (and Where It Breaks Down)

The dominance of three passive fund sponsors creates genuine benefits for investors: lower costs, better liquidity, and standardized products that simplify portfolio construction. But that same concentration introduces risks that are less obvious and harder to quantify.

The Common Ownership Question

When BlackRock, Vanguard, and State Street collectively hold 20 to 25 percent of outstanding shares in most S&P 500 companies, they are not just passive investors in a colloquial sense. They are the largest shareholders at the table when corporate boards make decisions about executive compensation, capital allocation, mergers, and competitive strategy.

Academic researchers have raised a question: does common ownership by the same three firms across competing companies dampen competition? The theoretical concern is that a fund sponsor holding significant stakes in, say, four competing airlines has little incentive to push any one of them toward aggressive price competition, because lower fares at one airline reduce profits at the other three.

Empirical studies have produced mixed results. Several researchers have documented higher prices in concentrated industries with high levels of common institutional ownership, particularly in the airline industry. Other researchers find little or no competitive effect when using different methodologies. The debate is active in both academic journals and policy circles, and the FTC has stated it is “prepared to take action on common ownership when appropriate.” Congressional proposals like the INDEX Act would require passively managed funds to pass proxy voting rights through to beneficial owners rather than voting centrally.

For advisors, the takeaway is not that common ownership is definitively harmful, but that the question itself reveals something about the scale of concentration. The fact that three asset managers hold enough shares to potentially influence competitive dynamics across entire industries is a condition that did not exist 20 years ago. Whether or not that influence is exercised, its existence is a structural feature of the market that informed advisors should understand.

The Proxy Voting Paradox

The Big Three vote on thousands of corporate proxy proposals each year. In the 2025 proxy season, they backed 98.7 percent of management-sponsored resolutions, a figure that has increased steadily from 96 percent in 2023. Their support for shareholder-sponsored resolutions, by contrast, was just 7.5 percent.

This pattern raises a governance question. Passive funds cannot sell a company out of the index; if a stock is in the S&P 500, the fund must own it. The primary mechanism for influencing corporate behavior is therefore the vote. Yet the Big Three’s near-universal support for management proposals suggests that their engagement, while extensive behind the scenes, rarely translates into opposition at the ballot box.

All three firms have responded to political and regulatory scrutiny by splitting their proxy voting teams into separate groups with distinct voting policies. This decentralization may address concerns about monolithic voting power, but it also adds complexity. Advisors recommending passive products should recognize that when a client buys an S&P 500 index fund, they are delegating corporate governance decisions to whichever voting framework the fund sponsor applies.

The Liquidity Assumption

Passive index funds depend on continuous liquidity in the underlying securities. During normal markets, the creation and redemption mechanism keeps ETF prices tightly aligned with net asset value. During stress events, that alignment can break.

In March 2020, some investment-grade bond ETFs traded at discounts exceeding 5 percent to their calculated NAVs. In that instance, many market participants argued the ETF prices were more accurate than the NAVs, because the ETFs reflected real-time trading while NAVs relied on stale bond prices. But the episode illustrated a structural vulnerability: when authorized participants widen their pricing or step back from arbitrage activity during extreme volatility, ETF prices and underlying value can diverge in ways that passive investors do not expect.

The dominance of three sponsors in equity ETF trading creates an additional consideration. If a liquidity event is severe enough to affect the operations of one of the Big Three, the disruption could ripple across a substantial portion of the market. This is a tail risk, not a daily concern, but it is the kind of systemic consideration that distinguishes a fund specialist from a generalist.

The Client Conversation These Firms Enable

“Why should I pay more for an actively managed fund?” The data on passive versus active performance is the foundation of this conversation. When a client understands that roughly 90 percent of active large-cap managers underperform their benchmarks over 15 years, the case for low-cost index products becomes intuitive. But the conversation should not stop there. Less efficient market segments (small-cap, emerging markets, high-yield bonds) offer better odds for active management, and the client’s tax situation, time horizon, and behavioral temperament all influence whether strict passive indexing is the right approach.

“Is there really a difference between these index funds?” For S&P 500 exposure, the performance differences among VOO, IVV, and SPY are negligible. The differences that matter are structural: expense ratio (VOO and IVV at 0.03 percent versus SPY at 0.09 percent), tax efficiency (Vanguard’s share class structure provides an edge, though that advantage may narrow as competitors gain similar structures), and trading characteristics (SPY’s liquidity is unmatched for large-block and options trading). Matching the product to the client’s use case is where advisor value shows.

“Should I worry about one company managing so much money?” This is a question most advisors are not prepared for, but increasingly sophisticated clients are asking it. The honest answer involves acknowledging the benefits (lower costs, better liquidity, standardized products) alongside the structural risks (concentration in proxy voting, potential systemic liquidity concerns, the common ownership debate). An advisor who can discuss these trade-offs with specificity demonstrates the kind of analytical depth that builds long-term trust.

The Advisor’s Edge

The data on BlackRock, Vanguard, and State Street is publicly available. Any client with an internet connection can look up AUM figures, expense ratios, and the basic argument for passive investing.

What separates a knowledgeable advisor from a well-read client is the ability to evaluate these firms’ products in context. Understanding why Vanguard’s ownership structure produces a permanent cost advantage. Knowing when SPY’s liquidity profile makes it the right choice despite a higher expense ratio. Recognizing where the dominance of passive investing creates blind spots: in corporate governance, in systemic liquidity assumptions, in the overlooked segments where active management still earns its fees. These are the analytical skills that transform publicly available data into portfolio decisions tailored to a specific client’s situation.

The Certified Fund Specialist® (CFS®) designation develops exactly this kind of fund-level expertise: the ability to evaluate fund structure, cost dynamics, sponsor characteristics, and market positioning as an integrated system rather than a checklist of isolated metrics.

For a closer look at how the fund industry’s concentration has evolved over the past two decades, see Fund Industry Overview: By the Numbers.

Sources and Notes: AUM figures sourced from BlackRock Q4 2025 earnings release (January 2026), State Street Q4 2025 earnings release (January 2026), and Vanguard corporate disclosures (most recent available). ETF market share data from U.S. News citing Morningstar (February 2024). Corporate ownership statistics from Harvard Law School Forum on Corporate Governance and Cambridge University Press (Business and Politics). Proxy voting data from Morningstar proxy voting reports (2025 proxy season). This article is refreshed annually as new earnings data and ownership studies become available.