Davidson, trustee for the West Putnam Avenue Trust, filed the suit on behalf of himself and all other shareholders, similarly situated, of the BlackRock Global Allocation Fund under Section 36(b) of the Investment Company Act of 1940. Defendants are BlackRock Advisors, BlackRock Investment Management and BlackRock International Ltd.
The suit alleges a breach of fiduciary duty. According to the complaint, BlackRock charged and received investment advisory fees that are “so disproportionately large that they bear no reasonable relationship to the services rendered and could not have been the product of arm’s-length bargaining.”
Further, the suit alleges that the overall subadviser’s fee assesssed by BlackRock is significantly higher—as much as $51 million more—than the fees negotiated at arm’s length by BlackRock Investment Management with other clients for the same or substantially similar investment advisory services.
As a result of these excessive fee rates, the fund has paid much more in fees each year than it would pay for investment advisory services had the fee arrangement been negotiated at arm’s length. “It is generally accepted in the mutual fund industry that it is not harder to manage a fund simply because it is bigger,” the complaint states.
The Brualdi Law Firm is acting on behalf of the plaintiffs. The case was filed in U.S. District Court in New Jersey.
According to widely published media reports, Davidson was a winner in the Connecticut state Powerball lottery along with two other executives of Belpointe Asset Management in 2011, but he subsequently asserted to friends in messages that he was not the winner. Davidson later admitted he was the holder of the winning lottery ticket, and the three money managers formed a trust to accept the after-tax payment of around $104 million.