A timely trade that never quite happened
Pete Hegseth, the U.S. defense secretary and one of the loudest internal champions of a military strike on Iran inside the Trump administration, is now at the center of an awkward little financial footnote. According to the Financial Times, a broker who works for him tried to line up a large investment in defense stocks in the weeks before the start of Operation Epic Fury.
Three people familiar with the matter told the newspaper that in February, the consultant advising Hegseth through Morgan Stanley contacted BlackRock to explore a multimillion-dollar investment in the firm’s Defense Industrials Active ETF before the military operation got underway.
BlackRock, Morgan Stanley, and the Pentagon all declined to comment, the London paper reported. Which, to be fair, is exactly what large institutions tend to do when a story begins to smell like a compliance seminar.
What the fund is and why it matters
BlackRock says the $3.2 billion fund, identified by the ticker IDEF, seeks “opportunities for growth by investing in companies that could benefit from increased government spending on defense and security, amid geopolitical fragmentation and economic competition.”
Its largest holdings include defense giants RTX, Lockheed Martin, and Northrop Grumman, all of which count the U.S. Department of Defense among their biggest customers. The fund also holds Palantir, the data integration company that sits close to the center of Pentagon strategy.
The proposed trade was never completed. The reason was mundane rather than dramatic: the fund, which launched in May of last year, was not yet available for Morgan Stanley clients to buy.
The ETF problem, in one tidy mess
Exchange-traded funds are designed to be as easy to trade as ordinary shares, but there are now more than 14,000 ETFs in existence. That has left most major brokerage and trading platforms offering only a selection of them, rather than the full catalog.
It is not known whether Hegseth’s broker later identified another defense-focused fund for the investment.
IDEF, which is listed on the Nasdaq, has risen 28% over the past year. But its recent performance has been less flattering: it fell by almost 13% over the past month and has not exactly benefited from the Middle East conflict.
Still, the fact that a broker linked to the defense secretary was preparing to move into a defense fund just as the department he leads was preparing to launch a large-scale military campaign is the sort of detail that tends to produce very inconvenient questions.
