Dell's LBO Pits T. Rowe Versus Vanguard, And the Rest of the Index Gang
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Monday, July 22, 2013

Dell's LBO Pits T. Rowe Versus Vanguard, And the Rest of the Index Gang

Barrons reporter Beverly Goodman writes about the unexpected role mutual fund companies have played in the Dell deal.

Southeastern Asset Management's Longleaf Partners brand, and T. Rowe Price are the two active managers siding with Carl Icahn, while Vanguard, BlackRock, State Street, Yacktman, Invesco, and Bank of New York Mellon are the indexers in favor of the deal.

What is notable in the Dell deal, is that the firms against the deal are known for active management and the firms for the deal are generally more index-dominated shops, Goodman writes.

One would assume that the part in votes makes sense given the fact that active managers are looking for investments that can outperform the market and indexers may have less of a stake because performance will be reflected in the index.

That assumption is wrong, however, because indexers have reason to want the S&P to perform well as private offerings are overtaking IPOs and the number of stocks are getting smaller. Goodman also points out that simply because Index-oriented firms like Vanguard's [profile] vote in line with proxy advisory firms, doesn't mean that those firms are blind followers. Goodman interviewed the head Vanguard's proxy voting group, who said the presumption is still that mutual funds generally follow ISS despite the reality.

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