BlackRock Cashes Out Crisis Bet to Expand Charitable Arm
By Dawn Lim
BlackRock Inc. made a well-timed bet on distressed loans during
the financial crisis. Now the firm has moved its windfall to its
In a move disclosed Thursday, the giant asset manager said it
has donated all of its nearly $600 million worth of shares in the
mortgage company PennyMac Financial Services Inc. to fund
nonprofits. Half of that went into a new corporate foundation the
firm is launching called the BlackRock Foundation.
By moving the stake to charity, the firm will also reap tax
BlackRock is setting up the new foundation as the firm's growing
influence has brought it new scrutiny. BlackRock, on behalf of the
funds it runs, is one of the five largest shareholders in nearly
every corporation in the S&P 500. That means the world's
largest money manager faces new demands from the public to use its
heft to address problems from poverty to environmental issues.
Chief Executive Laurence Fink is a vocal advocate for companies
thinking beyond shareholders. BlackRock has called for a fuller
accounting on climate risks from companies and is expanding its
range of funds that focus on companies with better social and
BlackRock has split nearly $600 million worth of shares in
PennyMac between two platforms. The first is a new foundation
BlackRock said is aimed at advancing "a more inclusive and
BlackRock has traditionally done philanthropic work by making
grants, and a foundation would give BlackRock more flexibility to
structure giving in different ways, said Deborah Winshel, who is
head of BlackRock's charitable arm and president of the new
BlackRock donated the rest to an existing donor-advised fund
that has supported organizations from those that train women in
Latin America for technology jobs to those that assist farmers in
sub-Saharan Africa. The latest contributions add to the $50 million
BlackRock recently committed to build saving tools for lower-income
"We think it's so important that BlackRock shows up in the
communities in which it operates," said Ms. Winshel. She said that
BlackRock's philanthropic work on issues such as individual social
mobility and financial stability makes it an "extension of what the
BlackRock was a scrappy bond shop before it evolved into a
behemoth with $7.4 trillion in assets under management. It was one
of the biggest beneficiaries as postcrisis investors, weary over
complexity and costs, turned to funds that track markets and
software that could help them manage financial risks.
BlackRock's donation will bring the firm roughly $240 million in
tax benefits. The firm won't have to pay taxes on the $125 million
in gains on its corporate investment in PennyMac, and it will get
to deduct the $589 million in market value of charitable
contributions from its taxable income.
PennyMac shares fell by more than 4% on Thursday. The lender
said it supports BlackRock's philanthropic efforts and welcomes
more PennyMac shares becoming available to public investors.
Philanthropy and investments in communities have proven to be a
powerful way for the biggest companies to soften their images as
Alphabet Inc.'s Google said it would commit $1 billion to boost
housing construction in the San Francisco Bay Area as Silicon
Valley giants face scrutiny on how their presence in the places
where they do business is pricing out locals. JPMorgan Chase &
Co. has earmarked millions in philanthropic investments as part of
a $500 million effort to juice economic growth in cities.
BlackRock's retreat from PennyMac closes a pivotal decade for
the firm when some of its contrarian bets helped cement its
dominance in the investment world.
In 2008, the firm invested $34 million from its corporate
balance sheet to back PennyMac in anticipation of a wave of
mortgages at bargain prices that could be restructured. The venture
was controversial because it was run by former executives of
Countrywide Financial Corp., a now-defunct lender that became a
symbol for the excesses that led to the financial crisis.
The minority investment was made when BlackRock wanted to be a
bigger player in the home-mortgage space.
Its investment in PennyMac, a loan buyer and servicer, has paid
off handsomely. The stock has nearly doubled in value since it went
public in 2013.
BlackRock donated $125 million worth of its investment in
PennyMac to charity in 2013 but continued to hold a minority stake.
More recently BlackRock decided to exit from the rest of the
investment because it was no longer core to its business and to
fund charitable initiatives.
Half of PennyMac's market capitalization now consists of public
float, up from 17% after its 2013 initial public offering.
Write to Dawn Lim at email@example.com
(END) Dow Jones Newswires
February 13, 2020 17:05 ET (22:05 GMT)
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