BlackRock owns 17 percent of Sturm Ruger & Co. and 11 percent of American Outdoor Brands through its various mutual fund indexes.
The new funds also will leave out retailers, such as Dick’s Sporting Goods, Kroger and Walmart, that make at least 5 percent of their annual revenue, or at least $20 million, from firearms sales.
Those funds are part of what BlackRock called “enhancing our environmental, social and governance (ESG) and other index product offerings.” The initiative also includes reducing fees for funds that already exclude firearms manufacturers’ stocks.
The decision follows up on a March 2 BlackRock announcement in which it said it would respond to client requests for investment options that exclude firearms manufacturers and/or retailers.
BlackRock said at that time it would engage with firearms manufacturers and retailers to “understand their responses” to the Feb. 14 mass shooting at a high school in Parkland, Fla., that killed 17 people.
“We focus on engaging with the companies and understanding how they are responding to society’s expectations of them,” BlackRock spokesman Ed Sweeney said March 2.
BlackRock said it would create the small-cap ESG fund by April 12.
BlackRock also will offer a new line of investment-grade bond products “that are exclusively firearm-free available to certain institutional investors, including qualified U.S. pension plans, such as 401(k) plans.”
Those products would track the S&P 500, Russell 1000, Russell 2000, Russell 3000 and MSCI World ex-US excluding all producers and large retailers of civilian firearms.
“While these funds historically have included little exposure to firearms manufacturers, the new screen will expressly prohibit all manufacturers of civilian firearms,” BlackRock said.
Michael Walden, an economics professor at N.C. State University, said he was not surprised by the BlackRock no-firearms fund strategy.
“There are many funds that exclude companies engaged in production that some people disagree with,” Walden said. “It is another example of further segmentation of society.”
Zagros Madjd-Sadjadi, an economics professor at Winston-Salem State University, said that certain funds, such as state teacher pension funds, “might face pressure to divest from gun stocks, and this allows BlackRock to cater to these clients.”
The Associated Press reported March 19 that California State Treasurer John Chiang has called on CalPERS, the nation’s largest public pension fund, to stop investing in companies that sell assault-style weapons and devices that allow guns to fire more rapidly.
AP said CalPERS has a combined $850 million in holdings in Dick’s Sporting Goods, Walmart, Kroger, Big 5 Sporting Goods and Sportsman’s Warehouse Holdings. The fund’s total value is $354 billion.
“This would allow such clients to divest from firearms manufacturers and retailers without going into active management of individual stocks themselves,” Madjd-Sadjadi said.
However, Madjd-Sadjadi cautioned that “most actively managed funds have inferior returns over 10-year periods when compared with index funds.”
“This decision could reduce the performance of already burdened public pension funds to a point where their sustained viability may be called into question.”
American Outdoor responded to BlackRock by saying that while it supports gun-safety measures such as tighter background checks, it is cautious about adding “smart gun” technology to its weapons.
Ruger disclosed March 13 that it had sent a five-page letter to shareholders in which the company attempted to “plainly and directly address” the economic and political concerns fiercely swirling around the firearms industry. Ruger has at last count 334 employees at its plant in Mayodan.
Christopher Killoy, Ruger’s chief executive, and Michael Jacobi, its chairman, sought to assure, in defiant terms at times, that Ruger has no plans to stop making or selling semi-automatic modern sporting rifles for competition, recreation, hunting and personal defense use.
“We do not believe that law-abiding citizens should be stripped of their constitutional rights due to the criminal and heinous actions of a few individuals,” they said.
Edward Stack, chairman and chief executive of the retailer, said the teenager arrested in the Parkland shooting bought a shotgun from a Dick’s Sporting Goods store in November. “It was not the gun, nor type of gun, he used in the shooting. But it could have been,” Stack said.
Also on Feb. 28, Walmart said it will no longer sell firearms and ammunition to people younger than 21. It had stopped selling AR-15s and other semi-automatic weapons in 2015.
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