Large pension funds are demanding answers from S&P Global about its decision to allow companies with unequal shareholder voting rights into its popular indices, a move that allows private equity giants Blackstone and Ares to join the S&P 500.

The Council of Institutional Investors, which represents pension funds and has advocated against unequal voting rights, said it “was surprised and disappointed” by S&P’s decision on April 17 to reopen the S&P 500 and other indices to companies with multiple share class structures, according to an April 25 letter to S&P seen by the Financial Times.

“We were also disappointed by the opaque process S&P Dow Jones used to reach its decision,” CII said, asking for a meeting with company officials.

S&P’s change reverses a five-year-old policy of barring new companies with dual-class shares from indices. S&P initially banned dual-class companies in 2017 after Snap, the owner of the Snapchat app, went public with no voting rights, sparking an uproar from pension funds. S&P’s prohibition did not force out existing constituents such as Alphabet, Berkshire Hathaway and Meta.

For decades, institutional investors and companies have warred over dual-class shares. This set-up was typically used by family-controlled companies such as Ford and the New York Times to preserve family control over the businesses by selling stock with significantly less voting power.

In recent years, more initial public offerings have increasingly included dual-class shares, especially since Google’s controversial dual-class float in 2004. Pension funds and other big investors have attacked dual-class shares for undercutting their sway over boards. There are at present 27 dual-class share companies in the S&P 500, according to ISS Corporate Solutions. More than 100 companies are now eligible for S&P 500, the mid-cap 400 and small-cap 600, according to Keefe, Bruyette & Woods, an investment bank.

Investors said they were caught off guard by the S&P’s decision.

“We were deeply dismayed to hear of S&P’s retrograde decision” on multiple class shares, said Caroline Escott, senior investment manager at Railpen, which manages £35bn for British railway workers.

“It is currently unclear the extent to which the wider investment industry was appropriately consulted during the decision-making process over the last few months,” she said. “We are writing to S&P to ask for further information.”

S&P said the company occasionally reviews its index methodologies and the change on multiple class shares was a result of a public consultation last year with market participants.

Changes in markets and investor sentiment since 2017 meant that restricting multi-class companies “no longer served the index family’s objective”.

“Companies with multiple share classes are part of the total investable universe and should be eligible for potential addition,” it said.

S&P’s rule change means Ares and Blackstone could soon join the benchmark S&P 500 index, KBW said in an April 19 report. Blackstone was probably already eligible, KBW said, but S&P’s rule change “removes any uncertainty” about the private equity group’s eligibility.

“We have the largest market capitalisation of any company in the US not in the S&P 500,” Blackstone president Jon Gray said in an interview with the FT last week.

Jill Fisch, a corporate governance scholar at the University of Pennsylvania law school who has published research about dual-class share companies, said S&P’s prohibition on dual-class shares in 2017 did not deter companies from going public with the structure in recent years.

And there is an argument that small investors missed out on performance opportunities when dual-class share companies were banned by S&P. Companies such as Peloton and Uber were reined in by the market even though they had dual-class shares that protected founders, she said.

Ultimately, the ebb and flow of the stock market was likely to determine how many companies will try to go public with unequal voting rights, she said.

“In a tougher market for IPOs or a tougher equities market overall I think we can expect to see fewer dual-class IPOs,” she said.