Pentagon Denies Hegseth Defense Investment Allegations

ERBIL (Kurdistan24) - The Pentagon dismissed a Financial Times report on Tuesday alleging that a financial representative for U.S. Secretary of War Pete Hegseth sought to purchase shares in a defense industry fund in the weeks preceding the military conflict with Iran. 

Sean Parnell, the Assistant to the Secretary of War for Public Affairs and Chief Pentagon Spokesman, characterized the allegations as "entirely false and fabricated," maintaining that neither Was Secretary Hegseth nor any representative initiated such an investment or approached the asset management firm BlackRock for that purpose.

The report by the Financial Times, published Monday, cited three individuals familiar with the matter who alleged that a wealth manager at Morgan Stanley approached BlackRock in February 2026.

According to the publication, the inquiry involved a potential multimillion-dollar investment in BlackRock’s Defense Industrials Active ETF, which trades under the ticker IDEF. The timing of the alleged inquiry drew scrutiny as it reportedly occurred shortly before the United States and Israel launched a large-scale military offensive against the Islamic Republic.

The IDEF fund is a $3.2 billion equity fund designed to capitalize on growth opportunities resulting from increased government spending on security and defense, according to the asset manager’s descriptions.

The fund’s holdings include major defense conglomerates such as Lockheed Martin, Northrop Grumman, and RTX, as well as Palantir, a firm specializing in data integration.

These companies count the U.S. Department of War as their primary customer. The fund is designed to benefit from "geopolitical fragmentation and economic competition," according to BlackRock’s fund literature.

In a strongly worded rebuttal, Parnell criticized the report as a "baseless, dishonest smear designed to mislead the public." The Chief Pentagon Spokesman asserted that the Department of War has demanded an immediate retraction of the story.

"Secretary Hegseth and the Department of War remain unwavering in their commitment to the highest standards of ethics and strict adherence to all applicable laws and regulations," Parnell said in his statement.

While the Financial Times report claimed that the inquiry took place, it noted that the investment did not ultimately go ahead. The publication stated that the IDEF fund, which was launched in May 2025, was not yet available for Morgan Stanley clients to purchase at the time of the inquiry.

Although exchange-traded funds (ETFs) are structured for easy trading, most large brokerage platforms only carry a specific subset of the thousands of existing funds. The report acknowledged that it is not known whether the broker subsequently located an alternative defense-focused fund for the investment.

Secretary Hegseth has been identified as a central figure in the Trump administration’s national security circle and a primary advocate for the military campaign against Iran. President Donald Trump previously characterized the former television personality as the first in his circle to push for the intervention.

Before entering government service, Secretary Hegseth earned $4.6 million in salary from Fox News between 2022 and 2024, according to disclosure forms submitted for his Senate confirmation.

His financial background also includes nearly $500,000 in advances for two books, with royalties for each publication ranging between $100,001 and $1 million.

Additionally, the Secretary reported earning approximately $900,000 in speaking fees during that period. His most recent financial disclosure, released in June 2025, showed that he sold stock in 29 different companies, with values per transaction ranging from $1,001 to $50,000.

The IDEF fund’s recent performance shows that the defense sector has not seen a uniform rise during the current conflict.

While the fund has increased 28 percent over the past year, it has declined by nearly 13 percent over the last month, according to market data. The report noted that individual investors often prefer ETFs over mutual funds due to lower fees, favorable tax treatment, and the ability to execute trades more rapidly.

The allegations surface amid heightened scrutiny from Wall Street analysts regarding trades made in financial and prediction markets ahead of significant administrative decisions.

Both BlackRock and Morgan Stanley declined to comment on the matter following the publication of the report and the subsequent denial by the Pentagon. Secretary Hegseth has frequently emphasized the military strength of the United States and remains one of the administration's most vocal supporters of the ongoing regional operations.

The Pentagon categorized the report as an attempt to mislead the public, reiterating that the Secretary of War has maintained strict adherence to all federal ethics laws throughout his tenure. The administration continues to focus on its objectives in the Middle East as the conflict enters its second month.