By Jonathan Spicer
NEW YORK Feb 3 Two U.S. pension funds filed a
lawsuit against Blackrock, alleging that the world's
biggest asset manager had "looted" securities-lending revenues
from iShares exchange-traded funds investors, and breached its
In the suit, the Laborers' Local 265 Pension Fund of
Cincinnati and the Plumbers and Pipefitters Local No. 572
Pension Fund of Nashville 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
recover 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 two pension funds 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.
Blackrock, the largest manager of ETFs, said on Sunday the
complaint was without merit, adding it will "contest it
The company's securities-lending program has delivered
above-average returns to its ETF shareholders over time,
Blackrock spokeswoman Caroline Hancock said in an email. "To
achieve this, we run the program ourselves while bearing all the
costs, rather than outsourcing to third parties as others do,"
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.