Blackrock, Aberdeen Standard Investments and Kiltearn Partners were quizzed by MPs from the Business and Work and Pensions Committee on Wednesday over their investments in the failed construction firm, which collapsed in January.
During the meeting, Amra Balic said Blackrock held both a short and an index-tracking long position in Carillion.
Balic said clients had benefited to the tune of £36m ($50m, €40m) from short positions in Carillion held between 2013 and the start of 2018.
Labour MP for Hove, Peter Kyle, branded Blackrock’s relationship with Carillion as “schizophrenic”.
“You had some clients that were shorting, you had some clients that were doing long-term investments,” he said. “You saw your role as being quite hands off and just doing as your clients requested.
“You weren’t taking a view as to whether Carillion was well managed or not, you were just doing what your clients wanted to do with the stock.”
Number of questions
Balic said that although BlackRock held both positions, during her seven years at the firm active funds did not hold any long positions in Carillion stock, due to the firm’s negative view on the company.
“We felt that there are a number of real questions around fixed contracts, variable costs, large levels of debt and the fact that the company has gone through a number acquisitions.
“Our active portfolio managers did not see the industry and Carillion particularly as an attractive investment proposition.”
Balic said Blackrock received a letter from the construction giant in December 2016 stating it was “looking to allow for more opportunities, larger bonuses for the executives”, which the firm “had categorically said no to.”
“We have had a number of interactions with the board members, most recently in 2016 and 2017 – and that was around executive pay.
“It seems that the board was focusing more, thinking again how to remunerate executives rather than actually what was going on at the business.
Balic said there was “definitely too much focus at the board level around remuneration”.
The Wolverhampton-based firm met with key stakeholders, including the government, in the days preceding its compulsory liquidation to attempt to tackle its £900m debt and £587m pension deficit, as well as strengthen the group’s balance sheet.