In late May, an obscure BlackRock Inc. commodities fund took in more than $1 billion in new money in less than a week.
The iShares GSCI Commodity Dynamic Roll Strategy exchange-traded fund was a relatively small fund in BlackRock’s larger suite of funds. But on the week of May 26, the ETF—which trades under the ticker COMT and tracks futures contracts tied to commodities from energy to metals to agriculture—scored its biggest one-day influx of new cash on record, according to FactSet data.
The surge helped the ETF more than double its assets under management to more than $2 billion.
The answer for why so much money flowed into the fund wasn’t solely because Wall Street traders were up in arms with inflation fears that were helping to drive idle funds into commodity investments. According to BlackRock documents and people familiar with the matter, BlackRock had sent instructions to brokerages and other financial platforms to alter a series of “model portfolios” to include this fund.
Model portfolios are ready-made fund combos delivered through financial advisers and brokerages to everyday investors. Brokerages can design their own model portfolios, or rely on guidance from fund companies like BlackRock. The May surge in the BlackRock fund shows just how powerful that guidance can be.
Author(s): Dawn Lim
Publication Date: 9 July 2021
Publication Site: WSJ
Two Republican senators expressed concern that Thrift Savings Plan asset managers BlackRock and State Street Global Advisors are putting ESG and their CEOs’ “left-leaning” priorities ahead of their fiduciary duties when it comes to proxy voting.
In a letter Thursday to Federal Retirement Thrift Investment Board Acting Chairman David A. Jones, Sens. Pat Toomey of Pennsylvania and Ron Johnson of Wisconsin questioned the priorities of BlackRock and State Street Global Advisors, who between them manage nearly $500 billion for the $762.3 billion Thrift Savings Plan’s 6.2 million federal employees and members of the uniformed services. Of that, roughly $57 billion is managed by SSGA.
“We are concerned that BlackRock and SSGA may be prioritizing their CEOs’ personal policy views over retirees’ financial security,” the letter said.
Author(s): Hazel Bradford
Publication Date: 1 July 2021
Publication Site: Pensions & Investments
A recent analysis by Scientific Beta disputes “claims that ESG funds have tended to outperform the wider market.” Sony Kapoor, managing director of the Nordic Institute for Finance, Technology and Sustainability, a think tank, told the Financial Times that the research “puts in black and white what is only whispered in the corridors of finance — most ESG investing is a ruse to launder reputations, maximize fees and assuage guilt.”
BlackRock’s former chief investment officer for sustainable investing, Tariq Fancy, appears to understand this. He recently wrote in USA Today that he was concerned about portfolio managers exploiting the “E” of ESG investing because “claiming to be environmentally responsible is profitable” but advancing “real change in the environment simply doesn’t yield the same return.” Mr. Fancy criticized “stalling and greenwashing” in “the name of profits.”
This is a tacit admission that ESG investing upends the fiduciary duties portfolio managers owe their clients. As Mr. Fancy acknowledged, “no matter what they tout as green investing, portfolio managers are legally bound” to “do nothing that compromises profits.” As former Labor Secretary Eugene Scalia wrote on these pages last year, under the federal law that protects retirement assets, known as Erisa, “one ‘social’ goal trumps all others — retirement security for American workers.”
Author(s): Andy Puzder, Diane Black
Publication Date: 12 May 2021
Publication Site: Wall Street Journal
In places, BlackRock’s findings are redacted, so as not to show the size of particular holdings, but the conclusions are clear: after examining “divestment actions by hundreds of funds worldwide,” the BlackRock analysts concluded that the portfolios “experienced no negative financial impacts from divesting from fossil fuels. In fact, they found evidence of modest improvement in fund return.” The report’s executive summary states that “no investors found negative performance from divestment; rather, neutral to positive results.” In the conclusion to the report, the BlackRock team used a phrase beloved by investors: divested portfolios “outperformed their benchmarks.”
In a statement, the investment firm downplayed that language, saying, “BlackRock did not make a recommendation for TRS to divest from fossil fuel reserves. The research was meant to help TRS determine a path forward to meet their stated divestment goals.” But Tom Sanzillo—I.E.E.F.A.’s director of financial analysis, and a former New York State first deputy comptroller who oversaw a hundred-and-fifty-billion-dollar pension fund—said in an interview that BlackRock’s findings were clear. “Any investment fund looking to protect itself against losses from coal, oil, and gas companies now has the largest investment house in the world showing them why, how, and when to protect themselves, the economy, and the planet.” In short, the financial debate about divestment is as settled as the ethical one—you shouldn’t try to profit off the end of the world and, in any event, you won’t.
Author(s): Bill McKibben
Publication Date: 3 April 2021
Publication Site: The New Yorker
Meanwhile, investor efforts to require political spending disclosures at individual companies were halted on many occasions by large asset managers like BlackRock and Vanguard, which have regularly used their immense shareholder voting power to shield companies from transparency.
Now with a new SEC chairman, transparency advocates see an opportunity for progress.
“People want to know who companies are bankrolling,” said U.S. Rep. Andy Levin (D-Mich.). H.R. 1, the democracy reform package passed by House Democrats earlier this month, includes a bill from Levin to repeal the Republican measure blocking the SEC from requiring companies to disclose their political spending.
Author(s): Julia Rock
Publication Date: 10 March 2021
Publication Site: Daily Poster
The number of pension funds, endowments, and foundations adding Bitcoin to their portfolios has steadily risen over the past couple of years as the digital asset has gained more acceptance as an alternative asset.
Two pension funds in Fairfax, Virginia, began investing in late 2018 and 2019 in blockchain technology and Bitcoin through investments in two Morgan Creek Digital funds, which many consider the first investments in the crypto asset from a US pension fund. And a number of hedge funds, family offices, pension funds, endowments, foundations, asset managers, registered investment advisers (RIAs), and banks own Bitcoin outright through Boston-based Fidelity Digital Assets.
The world’s largest asset manager, BlackRock, recently said it is entering into the cryptocurrency business, according to US Securities and Exchange Commission (SEC) filings. BlackRock, which manages $8.7 trillion, said in its SEC filings that it is seeking to add the Bitcoin futures investments to the BlackRock Global Allocation Fund and the BlackRock Strategic Income Opportunities Fund.
Author(s): Ellen Chang
Publication Date: 11 February 2021
Publication Site: ai-CIO
Nearly two dozen fiduciaries of public retirement plans and others expressed concern over BlackRock’s internal practices and stewardship stances on companies’ political spending and lobbying activity.
Author: Hazel Bradford
Publication Date: 26 January 2021
Publication Site: Pensions & Investments