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Over the last twenty years, institutional investors have owned an increasing share of public equity markets — more than 70 percent of the largest 1,000 companies in the United States in 2009, for example. Over the past two years, in response to failures of some boards of directors and business leaders, shareholders, including institutional investors, have been given increased powers to participate in — or have disclosures about — discrete spheres of governance in publicly held corporations. Moreover, during this same period, and in multiple jurisdictions, there have been increasing calls from both the public and private sectors for institutional investors to play a broad “stewardship” role by “engaging” with investee companies to “help achieve long-term sustainable value” and to help curb excessive risk taking seen as a factor in the financial crisis.

But with these shifts in market and legal powers have come questions about institutional investors which are similar to those raised in the recent past about the corporations in which they invest. These questions relate to goals, strategies, governance, performance and accountability and, importantly, the separation of ownership and control (agency problems). They boil down to a bedrock query: do investors have the capacity to perform the role now expected of them? Institutional investors in this paper include: pension funds, mutual funds, insurance companies, hedge funds and endowments of non-profit entities like universities and foundations.