Dec 01, 2018



Dec 01, 2018



John Bogle, the founder of Vanguard and inventor of the index fund (and, in essence, modern “passive” investing), is sounding the alarm on his own creation. Like Frankenstein, the index fund has taken on a life of its own that its creator never anticipated.

Index funds that track the market have grown at a tremendous pace – they represent over $6 trillion and own 35% of the U.S. stock market. The trend is unlikely to abate, and these funds may eventually represent 50% or more of outstanding corporate shares. In that scenario, the “big three” (Vanguard, BlackRock, and State Street) alone might own more than 30% of the vote.

The fear shared by Bogle and a number of academics is that a select group of individuals will control the voting power in America’s public companies. The increasing control of index funds is further magnified by the fact that most average retail investors don’t understand the voting process – nor are they typically compelled to vote their shares.

Bogle and others are calling for legislative measures to mitigate the risk – including enhanced fiduciary standards that would more explicitly restrict index funds to vote in the interest of their shareholders.

No matter how the problem is addressed, one thing is for sure – we will need to find a way to keep the FrankenFunds in check!

Portfolio News

Regulatory year in review - Peter Kennedy, ERISA Advisor for portfolio company Vestwell, reviews the key regulatory changes in 2018 that impacted the retirement industry - including the (for now) abandoned Fiduciary Rule, the Retirement Enhancement and Security Act (RESA), and the Retirement Lost and Found Act. Read more

The Frankenfunds

Bogle sounds a warning on index funds - Index funds have grown at tremendous pace, now totaling over $6 trillion and representing more than 17% of total stock market value. Including actively managed funds, mutual fund managers represent more than 35% of the shares of U.S corporations. Read more

Industry News

Losing Steem: once one of the most active crypto projects cuts staff - Steemit, the social media platform built around the STEEM digital asset, is reorganizing its structure and downsizing 70% of its workers. The project, one of the many by Dan Larimer, has come under the ire of skeptics due to the large pre-mine and original wallets dumping coins. Read more

Fintech seeks untapped riches in b2b - In Europe, b2b fintech start-ups have attracted less investment than their consumer-focused rivals, but the gap is starting to close. In 2015, b2b fintechs raised $660m of capital, accounting for 34% of total funding, but last year, those figures had risen to $948m and 46%. Read more

Record mobile sales hit $2b on biggest Black Friday ever - US consumers purchased more than $2 billion of goods straight from their phones on Black Friday. Read more

Puff the tragic cryptowagon smokes out the Mumsnet demographic - The Alphaville team give eToro some heat for their most recent advertisement on Mumsnet, the UK parenting website. Read more

Bitcoin ETF seekers met with SEC In latest pitch for approval - VanEck, SolidX and the Cboe BZX Exchange met with SEC staff earlier this week to present a new argument centered around the idea that the bitcoin market is now mature enough to support an ETF. mRead more

Why aren't millennials spending? They're poorer than previous generations, Fed says - Despite millennials' much maligned, unofficial hipster status, the Fed's study indicates they're pretty mainstream and quite poor! Read more

Moody's is going to start building the risk of a business-ending hack into its credit ratings - Moody's is planning to complement its credit ratings business with a rating on risk from cyberattacks. The initiative may help investors who often struggle the potential impact of adverse cybersecurity incidents. Read more

Look at data from past Bitcoin crashes and you might (possibly) feel better - After a bearish year of price swings that culminated in a tightly wound sideways movement, the bottom dropped out for the crypto market when BTC finally pierced $6k this month. Colin Harper looks to past analogies of historical Bitcoin crashes to impart what the data tells us about where we go from here. Read more

Select Financings

Bright Health - Minneapolis based health insurance startup has raised a $200m Series C from Bessemer and other investors. Read more

Flipside Crypto - Florida based crypto network activity tracker has raised $4.5m Series Seed capital from DCG, Coinbase Ventures, and Castle Island Ventures. Read more

LearnLux - Boston based educational fintech startup has raised $2m of Series Seed funding from Sound Ventures (Ashton Kutcher) and Marc Benioff. Read more

LoanStreet - New York based loan origination and syndication platform has raised a $6.5m Series A led by Valar Ventures. Read more

MondoBrain - Paris and Washington D.C. based business decisioning platform has raised $13.3m in venture financing from Japia. Read more

Numerated - Boston based lending-as-a-service and marketing platform for community and regional banks has raised an additional $8m in financing led by Venrock, FIS, and Fintop Capital. Read more

Oriente - Hong Kong based mobile lending and financial inclusion platform has raised $105m in equity capital from Berjaya Group, JG Summit, and Sinar Mas. The round ranks as one of the largest initial funding rounds by a startup in Asia. Read more

Securitize - California based tokenized securities platform has raised a $12.75m Series A led by Blockchain Capital. Read more

Voyager - Philippines based mobile wallet provider has raised $215m from Tencent and IFC. Read more


FinTech Collective Newsletter

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