The future of Hasbro and Big Lots weighs heavy on investors

Whether or not two newbie activist investors are able to notch wins in their separate campaigns against Hasbro and Big Lots depends on several factors, but one in particular that looms large: street cred with the index funds.

Why it matters: The Big Three index funds — BlackRock, State Street, and Vanguard —own large chunks of these (and all) companies' shares and the funds will, at some point, show support for management or the activists. It's a stance that will likely make or break the campaigns.

Driving the news: Reuters reported on Sunday that Hasbro has rejected attempts by Alta Fox to strike a director deal to avoid a public fight.

• Hasbro's stiff arm indicates that at least a few major investors are signaling support for the management and board. Alta Fox is not a brand-name veteran activist fund, so it stands to reason that Hasbro's advisers see this as an advantage.
• For Big Lots, it's unclear where talks stand between the company and the activist. Mill Road, too, is not a well-known activist.

By the numbers: For Big Lots, passive funds own 38% of the stock, according to FactSet, the vast majority of that is in the hands of BlackRock and Vanguard. The Big Three own nearly 20% of Hasbro alone.

The bottom line: Index funds take note of activist funds that have pedigrees, experience, a record of success, a name in the space. Engine No. 1's success against Exxon last year gave hope to newcomers — though that fund had veteran managers within and a specific ESG focus.

• Upstart activists will usually find thin support from the Big Three, and that sets forth a challenging path for Alta Fox and Mill Road.