BlackRock to wind down fund that invested in failed car lender Tricolor

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Asset manager BlackRock is winding down a social impact fund that invested in collapsed subprime car lender Tricolor, according to several people familiar with the decision.

The firm told employees it would close its BlackRock Impact Opportunities fund to new investments after Tricolor filed for bankruptcy in September, the people said.

BlackRock would continue to manage the portfolio through what is expected to be a one-to-two-year period in which it will look to sell the $800mn fund’s investments, before closing the strategy fully.

Two of the people familiar with the decision said Tricolor’s bankruptcy was one catalyst for the closure. BlackRock also held extensive discussions in recent months with the fund’s investors, who agreed to halt new investments after more than 80 per cent of its assets had been deployed over the four years since it launched, one of the people said.

The fund would now focus on the operations and sale of its portfolio companies, said a person briefed on the matter. BlackRock declined to comment.

The decision comes as BlackRock has pulled back from many prominent social impact strategies by removing ESG labels from some exchange traded funds, or rebranding funds as “transition” investments.

BlackRock has also scaled back voting in favour of ESG-related shareholder proposals at a time when the Trump administration is cracking down on such initiatives.

The New York-based asset manager invested $90mn to acquire a minority stake in the Dallas-based car lender in 2021. The collapse of the Texas group, which catered primarily to the Hispanic community in the US south-west — including people without credit scores — has sparked wider concern about the financial health of low-income people.

The justice department opened an investigation into Tricolor over fraud allegations, the Financial Times previously reported.

Before its collapse, Tricolor had touted its credentials as a social impact company, saying it was able to lend to people who typically struggle to access credit elsewhere, including customers without driver’s licences or social security numbers.

BlackRock launched its Impact Opportunities fund in 2021, saying at the time that it had secured $800mn in initial commitments to invest in “businesses and projects owned, led by, or serving people of colour, with a particular focus on Black, Latinx and Native American communities in the United States.”

“We designed BIO to pursue opportunities that have historically been undercapitalised and, as a result, may offer differentiated sources of return,” said BlackRock chief executive Larry Fink, in a statement on the company’s website.

In addition to Tricolor, the fund also led a $90mn minority investment in Macro, a media company focused on “producing premium, award-winning TV and film content focused on people of colour”, according to a 2023 press release.

It also backed Lone Peak Dental Group, a paediatric dental care company with “several practices strategically situated to address the needs of underserved population”.

BlackRock was part of a cohort of high-profile Wall Street groups that backed Tricolor. JPMorgan, the US’s largest bank by assets, Barclays and Fifth Third had hundreds of millions of dollars in lending exposure to Tricolor, the FT previously reported.