Tech company exposure ahead of antitrust probes

The largest U.S. tech companies — Alphabet, Amazon.com, Apple and Facebook — face increasing public pressure because of their expansive growth in the marketplace.

The investment management industry holds about 79% of the total market value of Alphabet, Amazon.com, Apple and Facebook through various investment vehicles, while global pension funds hold about 3% in direct exposure. Most of the investment management holdings are held in passively managed funds within which all four of the stocks rank in the top five companies by market value, with only Microsoft ahead of them in those funds.

Pension funds' exposure should not be understated, while as a collective they hold 2.7% according to their most recent SEC filings, they still have significant holdings through their investment management relationships. The California Public Employees' Retirement System, the largest U.S. defined benefit plan, held about 12% of its $372.8 billion portfolio in passive U.S. equity vehicles as of Sept. 30, 2018, according to data from Pensions & Investments' Research Center. Allocations to passive U.S. equity, and consequentially exposure to this consortium of stocks, are even higher among the other large DB plans: the $226.1 billion California State Teachers' Retirement System held more than one-fifth of its plan in passive U.S. equity, and the $210.2 billion New York State Common Retirement Fund held about a third in indexed domestic equity.

Currently, this is more of a thought exercise for the market as any potential government-forced breakup of these companies is neither in motion nor will be quick to implement should it be ordered. Arguments surrounding anti-competitive practices would be at the forefront of any antitrust case brought and would likely be based on 100-year-old legislation. The European Union has already begun enforcing its own antitrust regulation on the collective, particularly Alphabet, which has incurred several multibillion-dollar fines from the EU.