Brendan McDermid/Reuters
- A Vanguard exchange-traded fund focused on socially responsible investing bought shares of a gunmaker after its underlying benchmark included them mistakenly, Bloomberg reported.
- The mistake happened during the index’s rebalancing in June, according to Bloomberg.
- Vanguard and the holder of the index fixed the mistake and notified clients right away, Bloomberg reported.
- Read more on Markets Insider.
Investors looking to put money into companies that align with their values may need to take a more active approach to investing.
Vanguard Group’s largest sustainable exchange-traded fund bought shares of gun maker Sturm Ruger after they were mistakenly included in the benchmark it tracks, Bloomberg news reported. The ETF held the shares for more than a month, according to Bloomberg.
The Vanguard US ESG Stock ETF was developed to give investors an investment vehicle for socially responsible investing. It was benchmarked to the FTSE Russell US All Cap Choice index, which screened US stocks by specific environmental, social and governance criteria.
According to FTSE Russell, the index excludes companies involved in non-renewable energy, vice products like adult entertainment, alcohol, gambling and tobacco, as well as weapons.
The FTSE Russell index was rebalanced in June, and accidentally included 11 stocks in the benchmark that didn’t fit the ESG parameters. The Sturm Ruger purchase, which was 219 shares worth about $9,000, was one of the stocks, Bloomberg found. FTSE Russell said the stocks were "inadvertently included" and that clients were told right away when the mistake was fixed.
"Though the exposure to these holdings was very modest, we regret that the error occurred and apologize to shareholders," Vanguard spokesman Freddy Martino said in a statement to Bloomberg.
While such rebalancing mistakes happen on occasion, this one was particularly stark compared to the mandate of the fund, according to Bloomberg.
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Source: Business Insider – feedback@businessinsider.com (Carmen Reinicke)