US securities laws have rules restricting activist shareholders. The main ones are:

1. If you acquire more than 5% of a company’s stock, and you plan on “changing or influencing the control” of the company, you have to promptly file a disclosure on Schedule 13D setting out your plans, your source of funds, etc. If you are a passive investor without any interest in changing or influencing control of the company, you can file a shorter, less detailed Schedule 13G. So if you are an activist hedge fund looking to run a proxy fight, and you go over 5%, you have to file a 13D; if you’re a normal mutual fund, you probably file a 13G. The point of the 13D is to alert the company, and its shareholders, to the fact that an activist is involved in its stock.
2. If you team up with another investor — “when two or more persons act as a partnership, limited partnership, syndicate, or other group for the purpose of acquiring, holding, or disposing of securities of an issuer” — you are considered to be part of a “group.” If you’re in a group, your shares are added together for securities-law purposes: If you own 3% of the company’s stock, and I own 3% of the company’s stock, and we agree to do an activist campaign together, then we form a group that owns 6% of the stock. So we need to file a joint Schedule 13D, disclosing that we are a group and own 6% of the shares.
3. If you go over 10% of a company’s stock, you are restricted from trading the stock: If you buy stock and quickly sell it at a profit, you might have to give up those profits. (These are the “Section 16 short-swing profit rules.”) If your group goes over 10% of the stock, everyone in the group is subject to short-swing profit rules.

This stuff is pretty vague. What does it mean to “change or influence the control” of a company? There are some obvious cases: If you are an activist hedge fund planning to run a proxy fight to replace the board of directors, or a potential buyer planning to launch a hostile takeover offer, you clearly want to change or influence the control of the company and you have to file a 13D. But if you are a regular old mutual fund that would never launch a proxy fight, you still might want to occasionally meet with the managers of the companies whose stock you own. In those meetings, you might ask questions and suggest ideas; you might say “hey I think you should expand the widget business and cut back on the sprockets,” or “man I did not like your last ad campaign,” or “what are you doing about climate change?” Are those efforts to “change or influence the control” of the company? Historically the answer has mostly been no; historically, everyone has assumed that 13D is for classic activists (who wage proxy fights), and that mutual funds can use 13G while still talking to companies.

The US Securities and Exchange Commission has given some guidance on these questions. Generally you can express your views to management, but “Schedule 13G would be unavailable if a shareholder engages with the issuer’s management to specifically call for the sale of the issuer or a significant amount of the issuer’s assets,” for instance, and “a shareholder who … exerts pressure on management to implement specific measures or changes to a policy,” by threatening not to vote for the board, “may be ‘influencing’ control over the issue”.

What does it mean to be a group? It doesn’t require a written agreement, and when two activist hedge funds informally team up to push a company in the same direction, they will often be accused of forming a group. On the other hand, if an activist hedge fund runs a proxy fight at a public company, what that means is that it will:

1. Propose new candidates for the company’s board of directors;
2. Call up other shareholders — index funds, mutual funds, etc. — and ask to talk to them to explain why they should vote for its candidates rather than the current board; and
3. Send out proxy cards for shareholders to fill out to vote for its candidates.

If a mutual fund takes a call from an activist hedge fund, listens to its arguments, says “you know what, you’re right, you’ve got my vote,” and then fills out a proxy card to vote for its candidates, does all that make it part of a “group” with the activist? Of course not; that would be absurd. But there are gray areas. What if it talks to the activist fund a lot? What if it encourages the activist? What if it casually mentions to an activist hedge fund “hey, we’re big shareholders of Company X and they could really use a proxy fight, if you’re bored”? What if it calls other mutual funds and says “we just met with an activist in Company X and they make some really good points?” Gray areas. Again there is some guidance: A shareholder is allowed to discuss “its views on a particular topic and how those views could inform its voting decisions” with an activist, but there’s probably some point at which it could go too far and become part of a group.^[1]

Most big institutional investors never want to file a Schedule 13D or be part of a group with other investors. In particular, the “Big Three” asset managers — BlackRock, Vanguard and State Street, who run a lot of index-fund money and own large percentages of every public company — really do not want to be 13D filers. Here are some reasons for this:

1. Being a 13D filer suggests hostility to corporate management, and big asset managers prize having good relationships with corporate managers. They are competing to manage the companies’ pension plans, they like to be able to exert subtle influence on the companies’ policies, they like to send out thought-leadership-y open letters to CEOs: Being cast as proxy fighters would be bad.
2. There are a lot of legal regimes that restrict “active” investors, in some sense, but make exceptions for “passive” investors. Antitrust law scrutinizes acquirers of large chunks of corporate stock, but exempts passive investors. Banking regulation restricts the financial activities of large shareholders of banks, but exempts passive investors. These legal regimes are not the same as the Section 13D rules; it’s not like being a 13G filer automatically makes you a passive investor for bank or antitrust regulation, or vice versa. But they are related, and these days there is a lot of suspicion of the Big Three’s passivity. If BlackRock had to file Schedule 13Ds for all of the companies it owned, that would make it harder to argue that it should be exempt from antitrust or banking restrictions. Being treated as an affiliate of every bank would be quite bad for BlackRock.
3. If the Big Three were a “group” with respect to some company, that group would almost certainly own more than 10% of the company’s stock. (The Big Three, among them, own about 22% of the stock of the S&P 500.) This would trigger the Section 16 short-swing profit rules and restrict their ability to buy and sell stock: If BlackRock was in a 22% ownership group, and it bought some of the company’s stock one week and sold it at a profit the next week, it would have to hand the profits back to the company. That is a big problem for BlackRock, in part because it would be a problem for any asset manager (limiting its flexibility) but in part because BlackRock is not entirely free to make its own investing decisions: If it gets inflows or outflows, or if an index changes, its index funds will mechanically buy or sell stock to reflect those changes.

When I say that “these days there is a lot of suspicion of the Big Three’s passivity,” I am especially referring to their environmental, social and governance records. For a long time, big asset managers — particularly BlackRock — talked a lot about ESG investing: Climate change is a real risk, customers wanted to do well by doing good, and there was a marketing benefit for asset managers who talked about ESG. But now Republicans are in power in the US, they do not like ESG, and ESG does not sound especially passive. “You go to every company and tell them to cut down on their emissions, or else”: That does sound like trying to influence the companies. “You go to every coal company and tell them to cut down on their coal production” sounds kind of like an antitrust problem! And it does not help that many asset managers, including BlackRock and State Street, joined Climate Action 100+, “an investor-led initiative to ensure the world’s largest corporate greenhouse gas emitters take appropriate action on climate change in order to mitigate financial risk and to maximize the long-term value of assets.” (They quit in February 2024, when the winds shifted.) “What do you mean that you teamed up with other investors to pressure all the companies to reduce their greenhouse gas emissions, that sounds like an agreement in restraint of trade,” etc.

I tend to think that a lot of this stuff is (was?) pretty vague and aspirational. BlackRock has, like, stewardship meetings and open letters telling companies to care about the environment, but it’s not clear how effective that is or how much control it actually has.

But there’s one big exception! Back in 2021, an activist hedge fund called Engine No. 1 ran and won a proxy fight at Exxon Mobil Corp., winning some board seats with plans “to push the crude driller to diversify beyond oil and fight climate change.” Engine No. 1 was a pretty small firm, and Exxon is a giant company, so this was an impressive win. I wrote at the time:

My Bloomberg Opinion colleague Conor Sen tweeted yesterday “a better way of thinking about things is Engine No. 1 persuaded Blackrock et al to make a change at Exxon, one of many companies they collectively control.” And I think that is right insofar as Engine No. 1 owns 0.02% of the stock and, to win this proxy fight, had to get big institutional investors on board with its plans. (Though that is true of most proxy fights, where the activist and management each put a lot of effort into courting the big institutions.)

But I also think it is a little backwards, in the sense that you don’t really need to persuade BlackRock that the oil companies in its portfolio should focus more on renewables and sustainability. BlackRock is really into that sort of thing! I’m sure that at every meeting, it tells Exxon “hey you should focus on renewables and sustainability.” The problem is that BlackRock couldn’t make a change at Exxon, that it doesn’t, exactly, control Exxon in a strict practical sense: It has a lot of votes, but most shareholder votes are nonbinding, and a determined board and management can ignore shareholders for a long time. What Engine No. 1 really did was give BlackRock et al. the opportunity to exercise control of Exxon; it launched a proxy fight that allowed a binding shareholder vote on Exxon’s direction. I think of this more as “Engine No. 1 gave BlackRock what it wanted” than “BlackRock gave Engine No. 1 what it wanted,” though of course both are true.

BlackRock, in its heart of 2021 hearts, wanted its portfolio companies to do more about climate change, and said so. But BlackRock was not in the activist-hedge-fund business. It was not going around filing Schedule 13Ds and running proxy fights at public companies. But was it voting with activists to do more about climate change? Sure, if the opportunity arose. As far as I can tell, Exxon in 2021 was the only time the opportunity ever arose; there are not a lot of climate-change-focused proxy fights.

But here in 2026, you might ask: Did this make BlackRock activist? BlackRock owned 6.7% of Exxon at the time (Vanguard owned 8.2% and State Street 5.7%) and filed a Schedule 13G. But if you take my loose characterization in that block quote literally, you might say: “Well, BlackRock wanted to change the direction of Exxon. Engine No. 1 magically appeared with a proxy fight that made that happen, and BlackRock gleefully went along. It’s a stretch to say that BlackRock didn’t have any intention to change or influence control of Exxon. In fact, it’s a stretch to say that BlackRock didn’t have any understandings with Engine No. 1, and with other ESG-curious asset managers, about the proxy fight. Really, when you think about it, they should all be 13D filers and all treated as a group.”

And then there’s Climate Action 100+! BlackRock and State Street had signed on to be members of a formal organization “focused on engaging 168 of the largest corporate greenhouse gas emitters to reduce emissions.” Didn’t that make them a bit of a group? Particularly at Exxon, where there was a proxy fight pushing the company to reduce emissions. Didn’t BlackRock and State Street have something of an understanding, with each other and with Climate Action 100+ and with Engine No. 1, about how they would vote?

I don’t know that I particularly believe any of that, but you know who does? The US Securities and Exchange Commission.^[2] Today it released a report saying that “the actions of certain members of Climate Action 100+ (‘CA100’) in connection with the election of dissident directors at the May 2021 annual meeting of the Exxon Mobil Corporation (‘ExxonMobil’) may have violated the Securities Exchange Act of 1934.” It “determined not to pursue an enforcement action,” but it “has serious concerns about the conduct of CA100 members and other participants in these activities”:

Specifically, this Report recognizes that the agreement, arrangement, understanding, or concerted action underlying the formation of a “group” may be implied and that coordinated engagement practices  ̶ ̶ even when undertaken through an intermediary may implicate the beneficial ownership reporting framework. While shareholders may deny the existence of a group, such denials are not conclusive as to whether a group has formed. Beneficial owners who do not wish to be part of a group therefore should proactively ensure policies aimed at avoiding group formation are adequately enforced. Irrespective of group formation, beneficial owners that report on Schedule 13G need to be mindful of whether their actions may be viewed as having been undertaken with the purpose or effect of changing or influencing control of a specific issuer. Membership in an organization whose stated purpose is to change or influence control of a specific issuer by promoting the election of dissident directors or otherwise could be a factor in the loss of eligibility to report on Schedule 13G instead of Schedule 13D.

Strictly speaking, this is pretty narrow: It’s not “you can’t join a climate-change action group and then tell oil companies to reduce emissions”; it’s “you can’t join a climate-change action group and then tell oil companies to reduce emissions when there’s a proxy fight.” Like I said, Exxon in 2021 is maybe the only climate-change proxy fight in US history, so this might not matter that much.

Still there are broader implications.^[3] For one thing: This might mean that there can’t be another climate-change proxy fight. Also the director of the SEC’s Division of Corporation Finance said in a statement:

As we head into the 2027 proxy season, the Commission’s 21(a) report reminds asset managers and investors of their responsibilities with respect to shareholder engagement, especially in the context of organized efforts that follow a playbook similar to that of Climate Action 100+. Shareholders have the right to express their views on a particular topic and explain their voting decisions. Congress has mandated that shareholders, acting individually or as a group, owning more than five percent of a public company must disclose their plans and other information if they seek to change or influence control of the company.

That is, the broader implications are:

1. Pushing companies too hard on ESG topics might look like trying to change or influence control of the company, so asset managers shouldn’t do it; and
2. Signing up to climate-change organizations might look like forming a group, so asset managers shouldn’t do it.

It is almost true that:

1. It used to be that people couldn’t invest in private equity or private credit in their 401(k) retirement accounts, and
2. Now they can, because
3. President Donald Trump signed an executive order to make that happen, and the US Department of Labor made rules to that effect.

Almost. I mean, that executive order and those Labor Department rules are real, and there have been lots of stories, including at Money Stuff, about how private assets are coming to 401(k)s.

But it was never really true that private assets were forbidden in 401(k)s, or that the rules had to be changed to allow them. Instead, the law for decades has been that companies that offer 401(k) retirement plans have to manage those plans prudently, which means among other things making prudent decisions about what investment options to offer. And so the question, in 1996 and in 2026, has always been: “Is it prudent to offer private equity in 401(k) plans?” 

You might imagine that, in the Labor Department rules, there’d be a list of Prudent 401(k) Stuff and another list of Imprudent 401(k) Stuff, and the Trump administration could move “private equity” from the second list to the first list and, boom, private equity is allowed in 401(k) plans. But of course that’s not how it works at all, there is no list, and instead this is all regulated by lawsuits. What happens is that some company offers some stuff in its 401(k) plan, and its employees invest in the stuff, and over some time horizon the stuff goes down (or at least underperforms some other stuff), and some enterprising plaintiffs’ lawyer — often a guy named Jerry Schlichter — sues the company, saying “you put your employees’ money in imprudent stuff.” And then the courts decide whether the company was prudent or not.

What has happened to cause a big rush of private assets into 401(k) is mostly a change in norms and vibes and expectations. I wrote last year, about private credit and private equity and crypto in 401(k)s:

The obvious answer is “last year they were not prudent, but the norms changed and now they are.” That’s not, like, a financial answer. It’s not that private equity and crypto were volatile and charged high fees in 2024, but now there have been structural changes such that they are safe and cheap. It’s that in 2024 the US federal government was pretty skeptical of crypto and of high-fee opaque investments in 401(k)s, and in 2025 a different federal government loves that stuff. 

But, as I have also written, the federal government (in the form of the Labor Department) actually has limited power to change these norms. The Labor Department can, and did, write rules saying basically “if you put private equity in 401(k) plans, it’s fine and no one can sue you,” but those rules are not actually binding on the courts (or the plaintiffs’ lawyers). They are, as the Labor Department admits, “persuasive authority.” The Labor Department expects that courts will agree with it that private equity is a prudent part of a 401(k) plan, but there’s no guarantee.

I think that the Labor Department is right, though. I think that, faced with a federal government rule saying “sure fine put private equity in 401(k)s,” and a lawsuit from a private lawyer saying “actually private equity in 401(k)s is bad,” courts will probably mostly agree with the government. And the shift in norms is broader than just the Trump administration’s actions: The whole financial industry has lined up behind the thesis that private equity should be in 401(k)s, which is its own form of persuasive authority.

Still, the binding authority would be if the US Supreme Court ruled that private equity in 401(k)s is good. And now it probably will. The Wall Street Journal reports:

The nation’s highest court on Tuesday heard arguments in a case, Anderson v. Intel, over when an employee can sue an employer for putting risky or unwise investments into the company retirement plan. 

The plaintiff, a former Intel employee, accused the company of violating its fiduciary duty by including private equity and hedge funds in its defined-contribution retirement plan, and alleged these investments performed worse than standard equity funds would have.

Tuesday’s Supreme Court debate hinged on whether a plaintiff needs to show underperformance versus an appropriate benchmark for a suit to survive a motion to dismiss. Several members of the court appeared to endorse the U.S. Appeals Court ruling last year dismissing the lawsuit.

Justices Samuel Alito, Ketanji Brown Jackson and Elena Kagan were among the justices who expressed puzzlement at aspects of the plaintiff’s argument. Some justices also rejected the idea that underperformance alone gives 401(k) plan participants grounds to sue.

“Whether a particular strategy is reasonable or not cannot be judged based on how that strategy performed in one particular instance,” said Justice Alito.

Here are the briefs for the plaintiff and for Intel. The plaintiff says:

Intel’s fiduciaries created their own bespoke funds and made them the default investment for participants. And for both plans, the fiduciaries designed the default funds so they would be heavily allocated in nontraditional assets like hedge funds and private equity — even as they marketed them using conventional labels (“target-date funds” and a “balanced fund”). Intel was an extreme outlier in this respect: About a third of each default fund was invested in these assets. None of the target-date funds or balanced funds offered by major providers came anywhere close.

Why everyone else shied away from these asset allocations is no mystery. Hedge funds and private equity, though useful for certain investors, make little sense as a dominant part of a typical retirement fund because they are illiquid, costly, and opaque. Even as a hedge against market volatility, traditional bonds are a better bet. Which is why federal agencies, financial experts, and published reports have all cautioned against allocating particularly large portions of a retirement portfolio to them.

Just a relic of another era. Back in the olden days, “federal agencies, financial experts, and published reports” all thought putting private equity in 401(k)s was bad, and so companies mostly didn’t do it. It wasn’t explicitly illegal, so some companies (like Intel) did it, but “Intel was an extreme outlier in this respect.” Now the norms have shifted: Federal agencies, financial experts and published reports (?) all say that private equity in 401(k)s is good actually, and Intel won’t be an outlier for long. 

At one level of abstraction, data center financing deals are all about the details. Data centers tend to be financed in asset-backed structures that have very high levels of leverage; the financing only works (and gets decent credit ratings) because the cash flows are very predictable, and the cash flows are predictable because they are guaranteed in some form by a giant investment-grade public technology company. The details of that guarantee are tricky and matter a lot, for credit and accounting purposes. The allocation of force majeure risk — what happens if the data center doesn’t get built on schedule, etc. — matters a lot for cash flow purposes. The depreciation schedules of the chips in the data center, the agreements it has with power companies, all of these details matter enormously given the relatively thin cushions with which data centers operate.

At another level of abstraction, data center financing deals are all about the simplest largest most general thesis in modern finance, “artificial intelligence is going to be really really really big and everyone will need all the chips and data centers they can get.” If you lend a billion dollars against a pile of Nvidia GPUs, you are not betting on the fine print of the force majeure provisions; you are betting “Nvidia chips good.” If that basic bet is right, ehhhh, you’ll probably get your money back. Maybe there will be permitting problems; maybe the particular giant AI lab that is leasing these particular chips will go bust. But someone will need the chips, they’ll eventually end up in their highest and best use, and you’ll eventually get paid.

Temperamentally, I lean more toward the first way of thinking, but I see the appeal of the second. Elon Musk is definitely more of a big-picture guy. Bloomberg reports:

Elon Musk’s SpaceX is in talks with banks and investors to raise $40 billion to buy chips from Nvidia Corp., people familiar with the matter said, in what would be among the biggest-ever debt financings for the AI buildout.

Apollo Global Management Inc. is apparently leading the deal, Pacific Investment Management Co. is involved, and I’m sure that the final deal will feature various elements that modern financial engineering has developed for chip financing. On the other hand, the Financial Times reports:

Investors whom SpaceX has previously approached about financing its multibillion-dollar chip purchase said they only received a short two-page deal memo with pictures of outer space and an arrow pointing out that the company was going to build data centres “somewhere in the universe”. 

“How are we supposed to take that to the IC?” one of the people said, referring to the in-house investment committee that approves transactions. 

I feel like “we are going to buy billions of dollars of chips directly from Nvidia, and then we are going to put them somewhere” is actually a pretty coherent thesis that can, and probably will, support billions of dollars of debt. I guess if you take a lien on the chips as collateral, and then SpaceX blasts them into an undisclosed location “somewhere in the universe,” you will have a hard time repossessing them, but SpaceX has an investment-grade rating so it’s probably fine. Anyway if you have a copy of that two-pager please send it my way. 

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