Pensions Accuse iShares of Looting
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Monday, February 04, 2013

Pensions Accuse iShares of Looting

BlackRock’s iShares could be in hot water due to a lawsuit filed by two pension plans.

The Financial Times reports that the suit, filed at the Tennessee Middle District Court by the Laborers’ Local 265 Pension Fund of Cincinnati and the Plumbers and Pipefitters Local 572 Pension Fund of Nashville, alleges that the asset manager systematically “looted” securities lending revenues from investors.

In particular, according to the FT, the suit says that a number of BlackRock’s US-listed iShares exchange traded funds operated a "grossly excessive" fee model that allowed an affiliate, the BlackRock Institutional Trust Company, to retain 40 percent of the revenue generated by lending stock.

Moreover, the suit claims that BlackRock, iShares and nine directors, BlackRock president Robert Kapito and iShares chairman Michael Latham "systematically violated their fiduciary duties" by setting up the fee structure, "which creates inherent conflicts of interest".

The suit has gotten the attention of a number of news outlets, including Reuters and Barron’s.

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