BlackRock is thinning its line of US investment products, planning to liquidate 15 in the coming months, including a Covid-era ETF focused on remote work and six sustainability-focused mutual funds.
That comes as demand for thematic ETFs appears to be falling and as US investors have pulled money from sustainable funds at a record pace.
The company launched the iShares Virtual Work and Life Multisector ETF in 2020, capitalizing on the remote-work reality and the businesses that supported it, as well as virtual services more widely. But more recently, major employers have issued return-to-office mandates, even if flexible work schedules are much more common than they were before the pandemic.
“Most people are not just working from home and doing meetings entirely on Skype. While we are not back to pre-Covid days we are much closer than we were in 2020,” said Todd Rosenbluth, head of research at VettaFi, in an email.
BlackRock itself has been part of that. The asset manager began requiring about half of its workers to be in the office three days a week in 2021 and last year increased that to four days a week for its employees, according to media reports.
The products being scrapped represent only a small slice of the firm’s catalog, as it has more than 600 US-domiciled mutual funds ETFs.
As of Monday, the Virtual Work and Life Multisector ETF represented just over $3 million in assets, according to data from VettaFi. The ETF has about 41 percent of its assets allocated to technology holdings, 32 percent to communications services, 11 percent to consumer cyclical, 10 percent to health care, and 6 percent to consumer defensive, according to Morningstar data.
Another ETF focused on the work-from-home market has similarly struggled with demand. That product, “WFH from Direxion quickly hit $100 million out of the gate in June 2020,” Rosenbluth said. “It has shrunk to $25 million and has had meaningful outflows.”
Last month, Bloomberg’s data showed that about $4 billion flowed out of thematic ETFs in the US during the first five months of 2024, following net redemptions of $4.6 billion for the category in 2023.
Unsustainable pace
In an announcement Friday, BlackRock said it would close and liquidate a handful of sustainable funds: the $1 billion BlackRock Liquid Environmentally Aware Fund, $41 million Sustainable Advantage CoreAlpha Bond Fund, $5 million Sustainable International Equity Fund, $48 million Sustainable Low Duration Bond Fund, $5 million Sustainable US Growth Equity Fund, and $3 million BlackRock Future Climate and Sustainable Economy ETF. The company's similarly named BlackRock Wealth Liquid Environmentally Aware Fund, which represents more than $3 billion, is not part of the closures or liquidations.
However, the company indicated that it was not necessarily shying away from sustainable investing as a category.
“BlackRock’s sustainable investing platform has grown sevenfold to over $800 billion in assets over the last five years and includes over 450 products globally,” the firm said in its announcement, adding that it manages more than $100 billion in energy-transition investments globally.
The firm is the biggest manager of sustainable US mutual funds and ETFs, at a total of $57.3 billion as of March, according to data from Morningstar.
Amid the record net outflows of $8.8 billion in the US first quarter for sustainable funds as a category, two iShares ETFs represented nearly half of the redemptions, with the company’s MSCI USA ESG Select ETF and ESG Aware MSCI USA ETF seeing combined redemptions of about $4 billion during the quarter, Morningstar reported.
Industrywide, only two new products came to the market during the quarter, down from nearly 30 during the first quarter of 2023. BlackRock was one of the two firms launching funds, with iShares Paris-Aligned Climate MSCI World ex USA ETF, which now represents about $55 million in assets.
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