Morningstar Identifies Over 500 Funds With SVB Exposure
Morningstar has identified 570 mutual funds and exchange traded funds that had exposure to SVB Financial Group stock.
Silicon Valley Bank collapsed last week after a significant number of tech startups and venture capital-backed companies, fearing a lack of liquidity, withdrew their money. The FDIC seized the assets of the firm, in the biggest bank failure since 2008. On Sunday, federal regulators said they would take steps to make SVB depositors whole starting Monday, March 13. Equity holders in the bank saw the value of their shares wiped out.
“The impact of SIVB’s fallout was muted for broadly diversified portfolios,” said Morningstar’s Bryan Armour, director of passive strategies research, North America at Morningstar, in a statement. “Actively managed mutual funds with concentrated portfolios tended to be the ones caught with the largest stakes in SIVB. Managers of these funds may have sold some of their stake before the stock dropped too far – performance should be telling.”
The Cromwell Tran Sustainable Focus Fund, a U.S. large growth mutual fund, had the highest exposure, with SVB representing 4.39% of the fund in its latest portfolio. That’s followed by the Morgan Stanley Institutional Global Concentrated R6 fund, at around 4% of the portfolio, and the BBH Select Series – Mid Cap I, at 3.53%.
Most of the funds held less than 1% of SIVB. Only two ETFs held over 1% of their portfolios in the bank equity, including the iShares U.S. Regional Banks ETF (IAT) and BlackRock Future Financial and Technology ETF (BPAY). But Morningstar points out those funds held similar types of stocks that were impacted by the wider SVB contagion across regional banks. IAT was down 13% at the end of last week, and it dropped another 14% on Monday.
Seventy of the funds on the list claim a “sustainable” investment mandate, Morningstar stated, with many of those slightly overweighted to SIVB compared with the Morningstar index for the asset class.
“Some sustainable funds might look to invest in banks for the solutions they fund, such as improving access to housing for low-income populations (by way of access to affordable mortgages),” said Alyssa Stankiewicz, associate director of sustainability research at Morningstar, in a statement. “ESG funds might also invest in banks that they view as funding disruptive technologies for the renewable energy transition. While I can’t speak to specific fund manager theses for investing in SVB, part of their business was geared toward financing innovative climate technology, which is often a focus for ESG funds.”
Over the weekend, the FDIC started auctioning off the remnants of SVB Financial, which includes SVB Private, its $17 billion wealth management unit that includes the bank’s 2021 acquisition of Boston Private Financial Holdings.
Financial advisors within the bank’s wealth management unit were told that the company will be split into four pieces to be sold off separately, including the commercial bank, investment bank, wealth business and SVB Capital, its fund manager focused on venture capital investments.
Advisors haven’t been told who specifically is bidding on the wealth business, sources told Weathmanagement.com, only that a buyer would emerge in the next two days. Private equity firms are expected to bid on all the components, according to reports.