In what may be its grandest – if most hollow – virtue signaling gesture to date, BlackRock is planning to strip shares of major gun retailers like Wal-Mart, Dick’s Sporting Goods and Kroger from several “environmental social and governance focused funds” as the world’s largest asset manager races to cash in on the market for ESG products, which have been rapidly growing in popularity.
Effectively BlackRock is offering is offering gun-free versions of IWM and AGG. Why? So that even more people will buy its segmented, “socially responsible” products of course and feel good about themselves, while making sure that Larry Fink’s 2018 bonus is an all time high.
Even though Wal-Mart, Dick’s and other retailers raised the age limit for buying assault rifles to 21, among other measures, in the wake of the Valentine’s Day massacre at Marjorie Stoneman Douglas High School in Parkland, Fla., the Wall Street Journal reported that BlackRock will exclude these retailers on the basis that haven’t stopped selling guns altogether. Shortly after the shooting, BlackRock said it would speak with weapons manufacturers to “understand their responses” to the second-deadliest public school shooting in US history.
As Bloomberg further explains, the iShares MSCI USA Small-Cap ESG Optimized ETF, which will start trading on or about April 12, will track investment results of an index that is mostly made up of small-cap U.S. companies. BlackRock also filed an initial registration statement for the iShares ESG US Aggregate Bond ETF. Both ETFs will exclude producers and big retailers of civilian firearms.
While the asset manager is planning to offer a suite of new ESG products, its existing offerings have a total of $2.2 billion AUM – a paltry sum compared with the company’s $6 trillion AUM.
BlackRock plans to strip all gun sellers and retailers including Kroger from its current lineup of seven so-called ESG funds, which have some $2.2 billion in assets. Those products had minimal exposure to such firms.
It is also planning to offer new ETFs and pooled funds to 401(k) retirement savings plans that exclude gun makers and retailers. One of those ETFs will track the performance of a new bond index that is similar to the Bloomberg Barclays US Aggregate Bond Index, but excludes issuers that make 5% or more or $20 million in revenue from gun-related products.
Furthermore, while BlackRock’s leaders would prefer its customers to interpret this as a noble example of corporate activism, there’s at least one ulterior motive that we can see: Publicly-traded weapons makers are struggling in the Trump era amid a slump in gun sales (many assume that Trump will protect their second amendment rights at all costs, and therefore there is no longer the same urgency to stock up on weapons that existed during the Obama era).
And while one might’ve expected the shooting to lead to renewed interest in these stocks (a pattern typically observed during the Obama era), both Sturm Ruger and American Outdoor Brands – the holding company of Smith & Wesson – have struggled in the wake of the Parkland shooting. Meanwhile, Remington, America’s second-largest gunmaker, recently filed for bankruptcy.
And when it comes to gun retailers – even giant companies like Walmart – Trump’s risking of a “tit-for-tat” trade war with China could damage the sector more broadly, as retailers are forced to hike prices to account for new tariffs.
And so it appears that once again a Wall Street giant is cynically couching its marketing in the guise of social justice. Sound familiar?