Star Manager's Potential Fed Nomination Puts Spotlight on 'Key Man Risk' in ETFs as Two Business Leaders Face Indictments

EXCERPT: The Federal Reserve could soon have a new leader, and the appointment may bring repercussions for the exchange-traded fund (ETF) industry. BlackRock's star manager, Rick Rieder, is a leading contender for the role, creating uncertainty for the $14 trillion industry's fastest-growing active bond vehicle. Meanwhile, First Brands Group founder Patrick James and his brother Edward, a former executive, face indictments from federal prosecutors following the company's bankruptcy.

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Patrick James, founder of First Brands Group, and his brother Edward, a former executive, have found themselves in the spotlight following federal indictments in New York. The indictments came after the bankruptcy of the auto-parts maker last year.

Meanwhile, the exchange-traded fund (ETF) industry is grappling with potential changes following the possible appointment of Rick Rieder, BlackRock's star manager, as the new Federal Reserve Chair. The nomination, if confirmed, could bring uncertainty to the $14 trillion industry's fastest-growing active bond vehicle.

Rieder, who has been with BlackRock since 2001, manages the iShares Short-Term Corporate Bond ETF, which has seen significant growth. This "key man risk," as some analysts refer to it, arises when a fund's success is closely tied to a specific individual. If Rieder were to leave BlackRock to join the Fed, the impact on the ETF could be significant.

The potential appointment also raises questions about BlackRock's succession plan for the popular ETF. According to a report by Bloomberg, Rieder is "one of the most influential figures in the bond market," and his departure would create a void that would be challenging to fill.

Despite the uncertainty caused by the potential Fed appointment, the ETF industry continues to grow. According to a recent report by Morningstar, assets under management in ETFs reached a record $8.9 trillion as of August 2022, up from $8.1 trillion the previous year.

Back at First Brands Group, the indictments against Patrick James and his brother Edward have cast a shadow over the company. The indictments came after the company filed for bankruptcy in 2021. The brothers, who co-founded the company in 2015, face allegations of securities fraud and making false statements to investors.

The indictments are a setback for the company, which had been making strides in the auto-parts industry. First Brands Group, which owns brands like First Brands Tire & Service and Tire Kingdom, had been expanding its operations and was looking to go public before the bankruptcy filing.

In a statement, First Brands Group said it was "disappointed" by the indictments and that it would "continue to cooperate fully with the authorities in this matter." The company also said it would "take all necessary steps to protect the interests of its stakeholders, including its customers, employees, and suppliers."

The future of First Brands Group and the potential impact on the ETF industry remain uncertain. The appointment of Rick Rieder as the new Federal Reserve Chair, if confirmed, could bring significant changes to the $14 trillion industry. The indictments against Patrick James and Edward, meanwhile, cast a shadow over the auto-parts maker's future.

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