BlackRock Fiduciary Fight, Private Fund Pain
Welcome to this week's News Brief, a roundup of some of Ignites' top stories of the past week.
A federal judge ruled last week that?American Airlines?violated its fiduciary duty by including?BlackRock?funds in its 401(k) plan due to the New York-based manager's environmental, social and governance-related activity, Ignites'?Joe Morris?reported. None of the funds in the airline's plan are ESG strategies, but the judge ruled that the fact the manager voted proxies using an ESG lens is enough to side with the plaintiff. This could open up the floodgates to more litigation. "Any company whose 401(k) plan included managers who factor ESG considerations into proxy voting could be susceptible to a similar lawsuit," a lawyer?told?Ignites.
The opinion could impact more than just ESG funds. The judge said that since BlackRock is a large shareholder of American Airlines and financed about $400 million in the firm's corporate debt, using its funds constitutes a conflict of interest. The "incestuous industry" is filled with "powerful repeat players who rig the standard of care to escape fiduciary liability," the opinion?says.
Separately, the trial and tribulations of one private-equity interval fund could serve as a warning sign for other retail funds looking to invest in the private market. The?Wildermuth Fund?has been in liquidation for over 18 months,?Sean Teehan?reported.
Holding up the process is the fund's difficultly in valuing certain private, early-stage companies, a disclosure shows. Such valuation issues and long liquidation processes are common when it comes to private markets, a consultant told Ignites. It's likely that more private investment opportunities will eventually be available for retail investors, he noted. "Is the industry ready for it? Not completely," he said.
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Top Sellers
Investors piled $107 billion into active mutual funds sponsored by the 10 best-selling fund shops during the first 11 months of 2024,?Morningstar Direct?data?shows. Among the biggest dollar-getters are shops with captive audiences, like?J.P. Morgan's?Six Circles?and?Edward Jones'?Bridge Builders,?Daniel Gil?reports.
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