A consumer group has sent letters to multiple governors warning them about the risks associated with their states’ pension funds relying on BlackRock for pension investments, which the group claims has strong ties to China.
Consumers’ Research, a nonpartisan Washington, D.C. educational nonprofit, distributed its report late yesterday to the governors of the top 10 states whose pension funds are invested in BlackRock, a global investment management firm with $9.5 trillion under management.
“The warning is meant to raise awareness among American consumers that BlackRock is taking their money and betting on China,” Consumer’s Research Executive Director William Hild said in a letter he sent to the governors. By doing so “they are putting American security at risk, along with billions of dollars from U.S. investors.”
Washington has the largest public pension investment with Blackrock ($13 billion), followed by Florida ($10.7 bilion), New York ($9.8 billion), Nevada ($9.7 billion), Nebraska ($9.4 billion), South Carolina ($9.3 billion), Oklahoma ($5.8 billion), Pennsylvania ($3.5 billion), Montana ($2.9 billion) and West Virginia ($2.1 billion).
BlackRock is the first wholly foreign-owned company to obtain a license to operate in China’s $3.5 trillion dollar mutual fund industry, Consumers’ Report said.
“This is something that is likely to provide BlackRock with hundreds of millions of new investors and an incentive to boost Chinese companies over their U.S. competitors. As BlackRock continues to tell Americans how to run their businesses and their lives, they are knowingly turning a blind eye to the CCP’s malign behavior and worse, sending American pensions to China to support it,” the group continued.
Blackrock Spokesman Dominc McMullen responded to the charges in the report:"China and the US have a large and interconnected economic relationship. We recognize that our stakeholders have differing views on China. BlackRock takes those concerns seriously. We seek to balance the concerns of our stakeholders with our role as a global investor and fiduciary working for our clients as we navigate this very complicated relationship between the US and China. Our approach to Chinese-related investments is consistent with US foreign policy."
To protect investors "BlackRock supports our clients in making informed investment decisions by providing clear and current disclosure of all material risks associated with different investment products and markets," McMullen said. "As China's financial services industry matures, a more robust regulatory and legal framework will be essential to building even more trust and confidence of global investors, and Chinese savers," he added. "BlackRock is committed to continually pushing for improved standards, governance, and accounting transparency from all companies and countries wherever they are operating in the world. Our approach to China will be no different.”
BlackRock’s investment in China is dangerous for investors, Consumers’ Report also charged. “Even though BlackRock has taken major losses in its Chinese holdings this year, BlackRock is increasing its investments and encouraging its clients to do the same. Even on the cusp [of homebuilder] Evergrande’s collapse, BlackRock was still all-in on China,” added the group, which recommended that both public pensions, institutional investors and retail investors should “consider the risks associated with BlackRock’s services, especially any holdings of passive investment funds that include Chinese companies.”
Hill said BlackRock’s CEO Larry Fink, has become a “trusted partner” of China’s leadership, with China turning to him repeatedly as an advisor. “In 2015, BlackRock’s relationship with China was so close that CEO Larry Fink was summoned to China to provide counsel on how to address a downturn in the market there, something he has done many times since,” Consumers’ Report said, citing a CNBC report.