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Asset managers set to engage gun-makers in wake of Florida school shooting

Asset managers that control some of the largest stakes in prominent, publicly traded firearms manufacturers say they are working with the companies to curb U.S. gun violence in the wake of a recent school shooting in Parkland, Fla., that left 17 dead.

The asset managers expect gun-makers to disclose the risks that gun violence poses to their business and to explicitly support more responsible firearm use in the U.S.

With more than $6 trillion in assets under management, BlackRock Inc. is the world's largest asset manager. It owned the biggest stake in gun-maker Sturm Ruger & Co. Inc. and in American Outdoor Brands Corp., the company behind Smith & Wesson, as of Dec. 31, 2017, according to an S&P Global Market Intelligence analysis. BlackRock also owned 12.7% of outdoor goods and guns manufacturer Vista Outdoor Inc., making it the second-largest owner behind FMR LLC, the company that owns Fidelity Investments.

Following the Parkland mass shooting, BlackRock said it may end up casting proxy votes to influence gun manufacturers and retailers who sell guns. The move furthers a corporate governance push that has seen the company take a stance in recent months on environmental, social and governance issues such as climate change and gender diversity.

"The recent tragedy in Florida has driven home for BlackRock the terrible toll from gun violence in America," the firm said in a statement.

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Vanguard Group Inc. and State Street Global Advisors Ltd. also said in statements that they plan to engage with gun manufacturers. Vanguard added that it believes "boards and managements of gun manufacturers should disclose and mitigate the risks associated with gun violence and the ongoing national debate on gun safety and control." Vanguard owns a 9.5% stake in Sturm Ruger, 9.1% of Vista Outdoor and an 8.3% stake in American Outdoor Brands.

State Street Global Advisors echoed the sentiment, stating that it will seek "greater transparency from [gun manufacturers and distributors] on the ways that they will support the safe and responsible use of their products." The company has a 2.5% position in Sturm Ruger, a 2.5% stake in Vista Outdoor and a 1.9% stake in American Outdoor Brands.

BlackRock, Vanguard and State Street are the largest U.S. providers of exchange-traded funds, passive investment vehicles that track an underlying index. Because an ETF's holdings are based on the stocks included in its index, the ETF's sponsor cannot change the fund's stakes unless the index changes first.

Sturm Ruger, Vista Outdoor and American Outdoor Brands are all included in more than 250 indexes.

The majority of Vanguard funds exposed to gun-makers are index products, the company said in a statement, adding that 29 of its 388 funds are invested in the three gun manufacturers. Vanguard also offers a gun manufacturer-free product called the Vanguard FTSE Social Index Fund, which includes companies based on social, human rights and environmental criteria.

Capital Research & Management Co. had an 8.6% stake in Sturm Ruger valued at $83.2 million at the end of 2017. The company said in a statement that regularly meeting with management teams allows it to discuss "a variety of issues, including ethical business practices or the impact of a firm's products and operations on society."

"Recent events remind us how important these discussions — and our role in them — are to building a society we all desire," said Hannah Coan, a spokesperson for Capital Research and Management's parent company, in a statement. "We are engaging with gun manufacturers to understand their plans to ensure the safe use of these products."

Voya Investment Management LLC monitors its holdings across investment products, adjusting "them accordingly based on the investment guidelines of [its] clients, legal and fiduciary requirements and developments in the market," the company said in a statement.

S&P Global Market Intelligence reached out to the 10 largest owners of Sturm Ruger, Vista Outdoor and American Outdoor Brands for this story. Representatives from Invesco Ltd., Point72 Asset Management L.P. and LSV Asset Management declined to comment.

Representatives from FMR, London Co. of Virginia LLC, Dimensional Fund Advisors LP, DePrince Race & Zollo Inc., Balyasny Asset Management LP, First Eagle Investment Management LLC, Frontier Capital Management Co. LLC, HBK Investments L.P., Walthausen & Co. LLC, Credit Suisse Group AG and Luminus Management LLC did not respond to requests for comment by the time of publication. A representative from Gates Capital Management Inc. was not immediately available to comment.

BlackRock, Vanguard, State Street and Capital Research join a growing list of companies that are taking steps in the wake of the Florida shooting to alter their business plans as they relate to gun-makers.

Bank of America Corp. similarly plans to discuss gun manufacturers' roles in society and ways to help curb mass shootings. Online lender Kabbage Inc. also said it will no longer fund any businesses that sell firearms or ammunition to individuals under age 21 or that sell or manufacture any form of assault-style weapon.