ETFs Pressured To Drop Gun Stocks

March 01, 2018

Active Funds Dominate Ownership

In contrast, gun stock ownership by active funds, including mutual funds and hedge funds, swamps that by passive indexed products.

Table 2 compares the percent of shares outstanding owned by passive funds and active funds. For each of the three main gun manufacturers, active fund ownership significantly outweighs passive:


Table 2: Ownership of Gun Stocks
Name Biggest Shareholder Ownership by Passive Funds (%) Ownership by Active Funds (%)
Sturm, Ruger & Co. BlackRock 30.9 35.6
American Outdoor Brands Corp. BlackRock 21.4 34.5
Vista Outdoor, Inc. Fidelity 26.7 69.8

Source: Eric Balchunas, Bloomberg. Data as of Feb. 26.


Compared to passive funds, active funds own 13% more shares of American Outdoor Brands, makers of the AR-15 that was used in most of the recent mass shootings. In the case of Vista Outdoor, which manufactures hunting weapons and ammunition, active owns 43% more than passive.

It is true that the single largest stakeholders in these companies—BlackRock and Fidelity—are also asset managers that issue passively indexed ETFs. (Vanguard, State Street and Invesco are all significant stakeholders as well.) But this simply speaks to the concentration of passive assets in a few key names, says Balchunas.

"It's a question of optics versus reality," he explained. "Reality is that active funds are the largest shareholders [of gun stocks]. It's just that the ownership is spread out over 600 or so names, instead of two or three."

Pressure From Passive Funds

Yet it is these passive indexing giants (who, it should be noted, often manage significant assets in active products as well) that are leading the charge in applying pressure to gun makers.

Last week, BlackRock announced it would work with weapons manufacturers to "understand their response to recent events," said company spokesperson Ed Sweeney in an emailed statement to

‘Safe & Responsible Use’

State Street too has reached out to firearms makers. "We will be engaging with weapons manufacturers and distributors to seek greater transparency from them on the ways that they will support the safe and responsible use of their products," State Street spokesperson Andrew Hopkins told Reuters last week.

"Engagement" may take many forms. It could include shareholders encouraging gun retailers to impose restrictions on the kinds of guns they sell or to whom, or pushing manufacturers to incorporate "smart" technologies to limit usage of guns by unauthorized individuals.

It may also take the form of shareholder activism, including voting against directors or backing shareholder resolutions regarding gun safety at investor meetings.

History shows that large passive shareholders can affect significant change in the companies they invest in, especially if they work together. Last year, BlackRock, Vanguard and State Street teamed up to force ExxonMobil to report the impacts of climate change mitigation on its business, something ExxonMobil's management had long opposed.

"Even if all they do is engage in public debate, I think that matters, too," said Balchunas. "It sets the tone and gets people talking."


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