Among institutional investors, pension funds and insurance companies are thought to benefit the most from shareholder activism because they tend to have relatively long-term investment horizons. On the other hand, managers of index mutual funds have little interest in shareholder activism since they merely adjust their holdings when the mix of the index changes and want only to follow the index, not influence it.
In addition, mutual funds and pension funds may have conflicts of interest that encourage passivity. Activism by a mutual fund complex or a pension fund manager could strain its relationships with corporate clients. For example, a fund manager bidding for the management of a firm’s 401(K) plan may be reluctant to vote against the Board of Directors’ proxy recommendations.