On April 3, 2014, a shareholder in the BlackRock Equity Dividend Fund filed a lawsuit in U.S. District Court in New Jersey, alleging improper and excessive advisory fees. The lawsuit asserts that BlackRock is retaining a substantial portion of the Fund's advisory fees, despite delegating almost all of the investment management duties to an affiliated sub-adviser. The complaint also asserts that the Fund's fee schedule does not pass onto the shareholders the savings arising from the Fund's economies of scale.
For example, in fiscal year 2013, the Equity Dividend Fund paid BlackRock more than $144 million in investment management fees. Of that amount, BlackRock retained $37.6 million for itself and paid its affiliated sub-adviser $106.5 million in investment management fees. The lawsuit alleges that the additional administrative and supervisory services provided by BlackRock are minimal, resulting in excessive advisory fee charges.
The plaintiff charges that this fee structure is a breach of BlackRock's fiduciary duty to the Fund and seeks damages and a recission of the contracts that form the basis for these excessive fees.
This case has been consolidated with the Foote and Clancy cases into In re BlackRock Mutual Funds Advisory Fee Litigation.