Bloomberg’s Matt Levine on index funds, voting and securities lending

Should index funds be illegal?

When you lend out stock, you don’t get to vote that stock. The person who borrows it sells it short to someone else, and that buyer gets the vote. Stock lending is usually done on an overnight basis; if you are a lender you can recall your stock ahead of a big shareholder vote, so that you can vote on the important matters. But if you are a big index fund, you might not care that much about your vote—you own all the companies, so picking the board of any particular company might not matter that much to you, etc.—while you will care about getting every penny of stock lending revenue.

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