Empowerment unleashed

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Written by Charlie Barlow, Global Head of Sales, Tumelo. 



BlackRock claim the bragging rights as being the first global asset manager to allow their investors to vote their own shares in pooled funds, an initiative known in the industry as pass-through voting. Offering pass-through voting across a number of their institutional funds as early as January 2022, BlackRock ultimately extended their programme to allow $200 billion of their retail assets under management (AUM) to direct their own voting, with about 25% of these investors taking advantage of the service [1].

Not willing to give their rival a competitive advantage, Vanguard and State Street were quick to follow suit, commencing their own pass-through voting programmes across a select number of funds in 2022 [2] [3]. State Street have since doubled-down on this initiative and today offer pass-through voting on 81% of their total assets under management with a particular focus on their equity index managed assets. Vanguard, likewise, have recently announced a decision to expand their offering to additional funds in 2024.

Why pass-through voting?

Pass-through voting has risen to prominence in recent years for a number of reasons, some of which are detailed below;

  1. Investor empowerment: By allowing asset owners to vote on issues such as the environment, executive compensation and human rights, it aligns investor ownership with control. This empowerment can help to improve transparency and accountability in corporations.

  2. Regulatory push: Regulators the world over are keen to ensure that the ownership and control of companies is not held in the hands of a small number of powerful asset managers. In the US, the INDEX Act would amend the Investment Advisers Act of 1940 requiring asset managers of passively managed funds to vote proxies in accordance with the instruction of their asset-owner investors and not at the discretion of the asset manager.

  3. Democratic governance: Pass-through voting can lead to more democratic corporate governance by allowing a broader range of voices to be heard, particularly pertinent in a US election year where there is a huge disparity of voting intentions being witnessed from the so-called blue states versus the anti-ESG red states.

  4. Investor demand and engagement: Pass-through voting encourages asset owners to engage more actively in corporate governance. By having a direct say in how companies are managed, asset owners can take a greater interest in researching the companies they invest in, leading to more informed decision-making. The desire to have a say at vote time has grown considerably in recent years and allows these investors to align their voting across multiple asset managers.

  5. Investor advocacy and activism: Pass-through voting enables asset owners to participate in corporate activism. Shareholders can advocate for changes within a company and can empower activist shareholders to push for corporate accountability.

Why do retail investors care?

As a general rule of thumb, institutional asset owners command more sway for asset managers over retail asset owners due in-part to the volume of assets invested (and greater associated fees). But in recent years retail investors have become more vocal and for some asset managers, like Vanguard, retail asset owners are their primary focus.

There are a number of reasons why the trend of retail asset owners wanting to vote their own shares is gaining traction:

  1. More informed investors: Retail asset owners are becoming more informed about and engaged with their investments. They increasingly want to vote on issues like board elections and executive compensation with pass-through voting affording them the opportunity to do so, for the first time (see below on Tesla)

  2. Technology advancements: Advances in technology, like those from Tumelo, have made it easier to facilitate pass-through voting and and at the same time, make it cost-effective.

  3. The rise and fall of ESG: Environmental, Social, and Governance (ESG) considerations have become more prominent in recent years. Retail asset owners who wish to prioritise ESG issues can now do so — of equal importance, pass-through voting also caters to those asset owners whose sentiments are more aligned with pecuniary considerations only.

  4. Retail investor growth: The number of retail asset owners has surged in recent years, driven in part by the huge growth in the Exchange-traded Fund (ETF) market.

These trends reflect a broader shift towards democratising the investment landscape. Given pass-through voting allows for greater retail asset owner choice, what's not to like about this new technological advancement? Until recently, asset managers were able to offer multiple choices when it came to fund selection but often only one choice when it came to voting on those shares. Retail asset owners increasingly want to put their money where their mouth is and vote on matters of importance to them, be it the environment, say-on-pay or animal welfare.

Fintech innovation has disrupted the proxy-voting ecosystem. Companies like Tumelo can now identify which individuals own shares in mutual funds, integrating with their investment platforms and brokers through new APIs and aggregation technology which allow investors to verify their ownership of any fund that they hold through a platform. Working with custodians, Tumelo can now calculate the exact number of shares that a retail investor is entitled to vote on at any given company or vote, depending on the concentration of that asset within the fund.

Retail investors are seeking greater stewardship customisation, and pass-through voting provides a simple, modern solution.

Recent Tesla proxy votes have highlighted the issue

While some of the world's larger asset managers are now offering pass-through voting to some of their institutional and retail clients, there are still millions of retails investors who are unable to cast their vote on matters of importance within pooled funds. During the recent proxy votes for the June 2024 Tesla shareholder meeting , a survey was carried out of retail shareholders who were unable to cast their vote on Elon Musk's compensation package.

The first 1,500 investors surveyed represented more than 2million shares who were unable to vote on such matters. As one disgruntled shareholder commented on 'X', "the ability to vote on shares should be the same for the individuals who own shares through index funds as it is for the institutional investors in actively managed funds. Why do the large asset managers get to cast votes on behalf of we retail investors within index funds? It's our money and our privilege to vote."

Activists like Alexandra Merz from L&F Investor Services are prepared to highlight the issue, naming and shaming those broker platforms who are not allowing retail investors to vote their own shares and the top 20 countries most affected. [4]


Asset owner demand for pass-through voting in the US (both institutional and retail) is on the rise, and coupled with the desire for more transparency and engagement from the SEC it looks like the trend is here to stay.

As announced by Ignites Europe earlier this year, Northern Trust are the next large US asset manager set to offer pass-through voting across both institutional and retail clients. It seems the next group of largest fund managers by AUM are following the lead of the so called Big 3 (State Street, Vanguard and BlackRock). Don't be surprised if later in 2024 there is a trickle of new announcements from US retail asset managers who are yet to declare their hand.

There will likely come a time in the next 2-3 years when offering pass-through voting is the norm and not the exception — and those asset managers and brokers not willing to offer the service may find their assets under management under threat with disgruntled investors moving their money elsewhere.


[1] Blackrock Voting Choice FAQs

[2] Vanguard Launches Proxy Voting Pilot

[3] State Street, Proxy Voting Choice Powers Investors

[4] I want to vote my proxy