A broker acting for US Defence Secretary Pete Hegseth explored a multimillion-dollar investment in a defence-focused exchange-traded fund in the weeks before the US and Israel launched military strikes against Iran on February 28, according to the Financial Times.
The FT, citing three people familiar with the matter, reported that the broker, based at Morgan Stanley, contacted BlackRock in February about a potential investment in the iShares Defense Industrials Active ETF, which trades under the ticker IDEF. The inquiry was reportedly flagged internally at BlackRock because it came on behalf of a “high-profile potential client.”
The Pentagon has denied the report. Chief spokesperson Sean Parnell dismissed the allegation on social media platform X, calling it “entirely false and fabricated.” Parnell said that neither Hegseth nor any of his representatives approached BlackRock about any such investment, adding: “We demand an immediate retraction.” BlackRock and Morgan Stanley have not commented on the matter.
What is the IDEF fund?
BlackRock’s iShares Defense Industrials Active ETF, launched in May 2025, manages approximately $3.2 billion in assets. It invests in companies expected to benefit from rising government spending on defence and security. Its top holdings include RTX (formerly Raytheon), Lockheed Martin, Northrop Grumman, and Palantir Technologies — all of which count the US Department of Defence among their largest customers.
Why the investment did not go through
The investment never materialised because the fund, launched less than a year ago, was not yet available for purchase through Morgan Stanley’s brokerage platform at the time. While ETFs are generally easy to trade, most large platforms carry only a fraction of the more than 14,000 ETFs on the market. It remains unclear whether the broker subsequently pursued a different defence-focused fund.
How the fund has performed
According to LSEG data cited by the FT, the IDEF fund has risen more than 25 per cent over the past year. However, it has not gained during the current Middle East conflict — it has fallen nearly 13 per cent over the past month since the US-Israeli strikes began on February 28.
Why the timing draws scrutiny
Even though the investment did not go through, the timing of the inquiry is likely to attract scrutiny. Hegseth is one of the key figures behind the US military campaign against Iran and has been among the most vocal advocates for the strikes. President Donald Trump himself recently identified Hegseth as “the first” to advocate for the military action.
The FT report does not suggest wrongdoing, and it remains unclear whether Hegseth personally directed or was aware of the broker’s inquiry. The development comes amid broader scrutiny of trading activity ahead of major government decisions, with Wall Street analysts examining whether financial moves linked to Trump administration officials may have been informed by non-public information.
Disclaimer: This article is based on the Financial Times report and subsequent coverage. It does not constitute financial advice. Readers should conduct independent research before making investment decisions.