BlackRock is clipping more than a dozen mutual funds and ETFs from its lines, about half of which focus on sustainable investing.

In most cases, the funds appear to have struggled to attract assets: The majority each represent less than $50 million. In all, they account for $549 million, with nearly half of that in the $254 million BlackRock Impact Mortgage Fund, which has been in operation since 1992. The asset management giant filed notices Friday for many of the closures, largely for the sustainable funds. The firm did not offer specific explanations for eliminating any individual funds but stated in an announcement that “as we evolve our platform and launch new strategies, we also constantly assess how our funds are meeting investors’ investment objectives and the evolving needs of our clients.”

BlackRock in the Hot Seat

More than any other asset manager, BlackRock has faced the brunt of campaigns against sustainable investing and ESG, or environmental, social, and governance criteria. Over the past several years, BlackRock has been blacklisted by some states for allegedly boycotting the fossil fuels industry, despite being one of the biggest investors in it. Some of the ire stems from public comments by CEO Larry Fink, who had characterized social and environmental responsibility as necessary causes for asset managers. Recently, though, BlackRock has ended its membership in international climate groups, and it subsequently had investment restrictions lifted in Texas. Currently, the company, as well as Vanguard and State Street, face an antitrust lawsuit brought by a coalition of Republican states, including Texas, over climate-related initiatives.

The sentiment against ESG may have adversely affected demand for the sustainable products, but it’s unclear how much that factored into the low asset levels and decisions to end the funds. It’s notable that all but one of the funds being shuttered are actively managed, and most are at least four years old, said Hortense Bioy, head of sustainable investing research at Morningstar. “That also reflects the trend that passive is gaining more traction and active strategies are losing ground,” she said.

Investors have been pulling money from the company’s US sustainable funds, data from Morningstar Direct show:

• BlackRock’s sustainable mutual funds saw a total of $1.5 billion in net redemptions in 2024, while the iShares sustainable ETFs had $5.2 billion in net outflows.
• The mutual funds have shed $142 million so far this year through May, compared with $4 million exiting the ETFs.

Still Pretty Big: BlackRock has about $2.8 billion in assets in its sustainable US mutual funds and $55.9 billion in the iShares ETFs, the Morningstar data show. The company is also the dominant player in sustainable investing globally, with much of its assets in institutional strategies, Bioy said. “They’re still providing investment opportunities for investors who want to get exposure to the [energy] transition, but that’s in forms other than mutual funds and ETFs.”

ETFs tracking energy, aerospace, and defense stocks have wiped out initial losses following the onset of the conflict between Iran and Israel, instead climbing to new highs amid speculation that a prolonged conflict might drive up oil prices and fuel demand for weapons.

The attacks and Iran’s retaliatory strikes, which also sent shock waves through Israeli-focused funds and broader markets, have far-reaching implications, with gains and losses expected to amplify the market turmoil of the first half of 2025. Still, some experts maintain that holding is the best strategy and that diversification will continue to keep portfolios afloat, particularly since US Treasury yields have actually risen. “This just adds to the chaos we’ve already had this year,” said Sonu Varghese, a global macro strategist at Carson Group. “How we’re talking to advisors is, ‘Diversification may not have worked for the last 10, 15 years, but it’s really showing its colors now.’”

Domino Effect

The iShares MSCI Israel ETF (EIS) — which tracks an index of Israeli firms, including its major banks, and has $272 million in assets under management — fell from $86 to $82 a share Friday afternoon, per NYSE Arca data, but has since rebounded to a high of $86.70. The ARK Israel Innovative Technology ETF (IZRL), which also tracks Israeli companies, saw a similar dip Friday but is now up to a high of $25 a share. Other sector ETFs whipsawing in the aftermath include:

• The United States Oil Fund LP ETF (USO), which gained 12.4% last week and is now up 5.3% YTD, reflecting the potential for a longer-term spike in crude oil prices if shipping routes — primarily the Strait of Hormuz — are disrupted.
• The Breakwave Tanker Shipping ETF (BWET), which tracks crude oil tanker freight rates, jumped 11% Friday and has remained elevated as shipping stocks surge.

Back Away, Bonds: In the wake of the strikes, investors have flocked to so-called safe haven ETFs like those tracking the Japanese yen and the long end of the yield curve (such as bonds with a maturity of more than 20 years). However, a properly diversified portfolio doesn’t just rely on bonds to diversify from stocks, Varghese said, but includes things like gold and managed futures.

“There’s a bull case and the bear case, and that’s directly being reflected in our portfolios,” Varghese said. “I’m not saying this was exactly predictable, but our portfolios have been positioned to account for the fact that bonds may not be the best diversifier going forward.”

In the crypto ETF world, there’s a lot at stake.

Eight asset managers have filed or refiled Solana ETF trusts with the Securities and Exchange Commission over the past several days. The barrage of filings suggest that the regulator has been in talks with the firms about their proposals. Amended documents often indicate that companies are incorporating changes that the SEC wants to see — and the development hints that spot Solana ETFs may be approved relatively soon.

“Crypto filings generally see some back-and-forth conversation with the SEC, but it seems like Solana ETFs have a high probability of being approved within the next few months, according to precedent set by previous crypto products,” said Roxanna Islam, head of sector and industry research at TMX VettaFi.

Table Stakes

The recent filings have been updated to allow the proposed Solana ETFs to stake a portion of their shares. Staking, in which owners pledge tokens that are used to help secure the network, allows owners to get rewards in the form of more Solana. While the SEC recently expressed concerns with a pair of proposed Ethereum and Solana ETFs that would use staking, the agency’s Division of Corporation Finance has also commented that staking does not amount to a securities offering under the Securities Act of 1933.

The proposed Solana ETFs come from a variety of issuers:

• Five that would trade on the Cboe BZX Exchange include products from Fidelity, VanEck, Franklin Templeton, Bitwise, and 21Shares.
• The Grayscale Solana ETF would trade on NYSE Arca, while the Coinshares Solana ETF would trade on the Nasdaq.
• The Canary Marinade Solana ETF did not specify which exchange it would use.

Stake Through the Heart: “Ethereum ETFs were denied staking when they were first launched, but since then have filed for staking approval,” Islam said. “While the SEC has not yet approved staking for Ethereum ETFs, it’s possible it could potentially be approved alongside Solana ETFs.”