NEW YORK Feb 3 Two U.S. pension funds have
alleged in a lawsuit that Blackrock, the world's biggest
asset manager, has looted securities lending returns from
iShares exchange-traded funds investors, and breached its
In the suit, the pension funds allege that several iShares
ETFs spent funds on "grossly excessive compensation" to agents
affiliated with the ETFs, as well as on other agents, and they
want to recovery the funds for investors.
Blackrock's iShares ETFs have "systematically violated their
fiduciary duties, setting up an excessive fee structure designed
to loot securities lending returns properly due to iShares
investors," they say in the suit, filed on Jan. 18 in the Middle
District Court of Tennessee.
The Laborers' Local 265 Pension Fund of Cincinnati and the
Plumbers and Pipefitters Local No. 572 Pension Fund of Nashville
further allege that Blackrock officials and the iShares ETFs ran
a scheme to take at least 40 percent of securities lending
revenues - which they called "entirely disproportionate" - for
themselves at the expense of investors.
Blackrock President Robert Kapito and iShares Chairman
Michael Latham are named as defendants in the suit.
Representatives of Blackrock, the largest manager of ETFs,
did not immediately respond to a request to comment on the suit.
The recently-acquired iShares unit has been a stellar
performer for the New York-based asset manager, bringing in $36
billion of new business for Blackrock in the fourth quarter.