In the 1980s, the Reagan and Thatcher governments in the US and UK, respectively, championed the idea of a ‘shareholder democracy.’ According to the ideal, policies to promote asset ownership, whether property or shares, alongside the liberalisation of financial markets would supposedly distribute ownership of the economy throughout the population rather than just among the wealthy,[1] giving us all an interest and a say in its operations and thereby ensuring better economic outcomes.[2] However, the shifts in ownership that have transpired since have moved the economy significantly farther away from a system resembling ‘democracy’. Instead, the past several decades have been marked not only by an increasingly myopic and often destructive fixation on ‘maximising shareholder value’, but crucially also the steep concentration wealth, as well as of ownership and governance rights in the economy within a handful of vast asset management firms.

Asset managers are financial intermediaries, who formally hold stocks or bonds on behalf of those whose assets they invest. The asset management industry has seen explosive growth over the past twenty years, with global assets under management trebling from US$35 trillion at the start of millennium to over $100 trillion by the end of 2020.[3] Estimates suggest there are no signs of this growth slowing as the industry - which is currently comparatively overrepresented in high-income regions such as Europe and North America - expands in other economies around the world.[4] Importantly, this central element of the financial system is increasingly dominated by a small number of massive firms who have grown rapidly not only in absolute terms in recent years, but which have also seen their relative share of the asset management sector swell.[5[ This briefing – which introduces Common Wealth’s programme of work on the future of the sector - explores the implications of this rise and concentration in assets and, by extension, economic power, setting out key questions for policymakers, particularly with respect to this industry’s growing role in our response to global challenges, from ensuring a strong and fair Covid-19 recovery to tackling the climate crisis.