Companies with passive investors pay more for bank loans

Banks are charging companies with many index fund investors more for loans. This means that the rise of passive investing is making it more expensive for some companies to borrow money.

For years, the rise of index funds was seen as a way to lower costs for investors. But it turns out, this shift also changes how banks assess risk. Companies with a lot of passive ownership are now seen as riskier borrowers, which means they pay higher interest rates.