Privatization Could Benefit Barclays, State Street, Vanguard

Industry experts expect that if the government goes ahead with its plan to privatize Social Security, only the very largest index fund managers are likely to get a piece of the action, The Wall Street Journal reports.

That means, Barclays, State Street and Vanguard are most likely to see the estimated annual $65 billion in investments come their way. Barclays, in particular, could be chosen, as it manages funds in the government's Thrift Savings Plan, on which the Bush Administration has said it would like to model the private accounts. Investments of $65 billion a year would certainly be considerable, given that stock and bond funds took in $242 billion last year.

On the other hand, each individual account is going to start out with no more than $1,000 in the first year, isn't likely to top $12,000 even after 10 years and will pay money managers on the order of six basis points - none of which is appealing to fund companies.

"I think this speculation about this gigantic pool of money is just speculation," said James Riepe, vice chairman of T. Rowe Price and chairman of the Investment Company Institute. "And it would be a long time before it's a big pool. It's not going to be a broad opportunity for money management firms."