BlackRock to offer gun-free investment strategies, ETFs

[April 06, 2018]   By Ross Kerber

BOSTON (Reuters) - BlackRock Inc, the world's largest asset manager, said on Thursday it will offer new investment strategies and exchange-traded funds that exclude civilian firearms producers and retailers, following through on plans it outlined last month after a Florida high school massacre.

According to a client update sent by a company spokesman, BlackRock will offer a new line of firearm-free products to big institutional investors and pension plans that track broad market indexes like the S&P 500 and Russell 1000.

BlackRock also said it would create two new ETFs that would exclude gun makers and large gun retailers, and add similar screens to existing stock and bond ETFs that already consider social factors. The changes would bounce retailers from some current ETFs including Walmart Inc and Dick's Sporting Goods Inc.

Strong investor interest in the products in theory could weaken demand for shares of gun makers such as American Outdoor Brands Corp and Sturm Ruger & Co, where BlackRock funds have large stakes, although it could take awhile for clients to move enough money to make an impact.

BlackRock's action is the latest instance of a business responding to a backlash among many Americans against firearms companies following a series of U.S. mass shootings, although the eventual impact of the company moves remains unclear.

BlackRock has about $6 trillion under management. The firm and rivals have struggled to balance social and environmental issues important to clients with their need to own stocks represented in big worldwide indexes.

BlackRock did not make executives available for interviews including CEO Larry Fink, and did not offer more details about talks it has sought with companies involved with firearms. The gunmakers have defended their safety efforts.

Other firms already offer ETFs with at least some restrictions on gun-related stocks including the Global X S&P 500 Catholic Values ETF.

An exhibit booth for firearms manufacturer Smith & Wesson is seen on display at the International Association of Chiefs of Police conference in Chicago, Illinois, October 26, 2015. REUTERS/Jim Young/File Photo

Still, given the firm's size, BlackRock's new products could prove a significant step as financial firms face pressure to impose limits tighter than current laws act in the wake of the February shooting in Parkland, Florida that left 17 people dead and renewed a national gun control debate.

On March 22, Citigroup Inc added restrictions on firearms sales for retail clients.

Other banks and fund managers have said they would speak to clients involved with firearms, but they have not disclosed further actions, including Bank of America and State Street Corp.

BlackRock's new gun-free strategies will track broad indexes, including the S&P 500, the Russell 1000, Russell 2000 and Russell 3000, and the MSCI World ex-US index, and could appear in company 401(k) plans.

The ETFs getting the new screens have had little exposure to firearms makers, BlackRock said, and already consider social factors in their stockpicking such as the iShares MSCI USA ESG Optimized ETF.

The new screens would bar them from owning retailers with more than $20 million in revenue from gun sales. That would include Walmart and Dick's, although both in February said they would stop selling firearms to people under 21 years old.

BlackRock acknowledged in the client note that it runs money for a diverse set of clients "who have a wide range of views on firearms."

(Reporting by Ross Kerber in Boston; additional reporting by Trevor Hunnicutt in New York; Editing by Dan Grebler and Will Dunham)

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