- Major Wall Street managers such as State Street, Vanguard and BlackRock are (or were) in control of Silicon Valley Bank (SVB).
- In addition, some European companies through Nordic government pension funds, such as Norway and Sweden.
- How the collapse of Silicon Valley Bank shares impacts each one.
White House CEO Joe Biden explained in a conference this week what will happen to investors in SVB, the disgraced Silicon Valley bank everyone is talking about (well, before the Credit Suisse collapse, which made even more noise).
Biden pointed out that the money of the depositories is protected thanks to the support of the State, but warned that investors in the SVB will not run with the same protection, arguing that they knew about the risks they faced.
Words more, words less, Biden said that this risk cannot be offset, shareholders know that they can lose their money. And he ended up saying something like: this is how capitalism works.
So let’s see who owns (or had) ownership of Silicon Valley Bank before the financial company is intervened by the State for its liquidation?
Investment management companies were SVB’s largest shareholders: Vanguard had more than 11.3 percent of the shareholding, BlackRock 8 percent and State Street 5.2 percent.
index funds
These three companies are among the world’s largest in asset management. Let’s see.
The New York BlackRock is the first to have more than 9 billion dollars of assets under management.
In second place is The Vanguard Group, with close to 8 billion dollars.
The two own a giant index investment fund business, which replicates the evolution of market indices.
The ETFs were, especially, the most important funds in the shareholding of the Californian bank. Some time ago it was already growing strongly, and index funds had the obligation to incorporate it into their portfolios.
In the case of Vanguard, it held Silicon Valley Bank shares through three funds: the Vanguard Total Stock Market Index Fund, which replicates the evolution of US listed companies; he Vanguard Mid Cap Index Fund, which groups the medium-sized companies that are on the Stock Market; and the Vanguard 500 Index Fundwhich brings together the 500 largest companies.
Each of these investment funds is made up of countless owners, which determines that the bankruptcy of the Silicon Valley bank has had a diluted impact.
How BlackRock commits the bankruptcy of the SVB
BlackRock, another very important manager in which it operates through its subsidiary iShares, had a part of the shareholding of SVB through the investment vehicle ETF iShares Core S&P 500.
State Street Global Advisors, meanwhile, manages the world’s oldest and largest exchange-traded fund, the SPDR S&P 500 ETF, which had holdings in Silicon Valley Bank.
In any case, the share of the ETFs in the California financial was adequate to the importance it had in the respective index.
For example, those that track the S&P 500 index, the weight was less than 1 percent. In certain more specific index ETFs, such as the SPDR-S&P Regional Banking ETF, Silicon Valley Bank’s weight was 2.4 percent.
Pension funds with shares in the SVB
But not only these fund managers were involved. In addition, there were pension funds, which manage the monetary flows of the pension plans.
Among these we can name the most important sovereign wealth fund globally, the Norwegian oil fund, which owned a 1 percent stake in the Silicon Valley bank’s capital.
In addition it is found Alecta Pension Insuranceömsesidigt, which manages the pension plans of nearly 2.5 million Swedes.
These types of firms generally have a long-term perspective, with a portfolio of highly diversified assets. In the case of the Norwegian Government Pension Fund, it is the largest stock market investor worldwide, and its decisions replicate considerably in the composition of market indices.
Bankruptcy of one of the firms in the portfolios of these funds has little impact on the long-term performance of the ETF, because the weight they normally have in each share is very low. In other words, they are diversified portfolios.
Funds active in the SVB
In addition, there were some companies that manage funds that have bet on the bankrupt financial company, but none owned more than 5 percent of their vehicle in shares. Most of the most exposed funds had a tech or 100% banking profile.
DHPYX, for example, held 3.6 percent of its portfolio of more than $199 million in Silicon Valley Bank bonds at the end of February. The fund has fallen 8.7 percent over the past week.
The investment fund felt very close to the financial area for a long time, according to Dan Culloton, head of the equity strategies sector at Morningstar, the US financial services company. He has been buying shares in the Californian bank for the past year.
Another value-focused fund is Franklin Mutual Beacon, which held 3 percent of its $2.915 billion in SVB at the end of January.
The management firms acquired the value for the first time in November 2022. Other funds from the New York investment company, Franklin Templeton Investments, have shares in the financial institution, including Franklin Mutual Quest and Franklin Mutual Shares.
Who entered the SVB in the last few months?
It is not yet known who have really had the worst consequences of the failure of the Silicon Valley Bank. It is because the stock ownership information is more than 30 days out of date.
Although it is possible to observe which are the companies that bought SVB shares in the last 90 days before the debacle, with the exception of the previous month.
Firms that manage assets such as Invesco Corporate y Franklin Resources they bought shares in SVB’s parent a few months before the bank’s collapse, wiping out 60 percent of the value of their shares in just 24 hours.
These firms, in addition to Two Sigma InvestmentsDe Shaw & Co, BlackRock and Renaissance Technologies, were among the top 10 largest buyers of shares as of the end of 2022.
A hedge fund specializing in systematic trading using quantitative models derived from mathematical and statistical analysis, RenTech is known for achieving the highest returns in history.
It was founded in 1988 by a mathematician and has achieved an average return of more than 65 percent each year from that year to 2018. Although in this case it was not the best decision to acquire SVB shares.
