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Pentagon rejects claims that Defence Secretary Pete Hegseth’s broker sought a defence ETF investment before the Iran strike, as scrutiny grows over timing, Wall Street links and potential conflicts of interest.
US Defense Secretary Pete Hegsseth (AFP)A broker acting on behalf of Pete Hegseth, the US Defence Secretary, reportedly attempted to secure a multimillion-dollar investment in a major defence-focused fund in the weeks before Washington launched military strikes against Iran, a disclosure that the Pentagon has moved swiftly to deny.
What the Financial Times Reported
According to a Financial Times investigation citing three people familiar with the matter, Hegseth's broker at Morgan Stanley approached BlackRock in February about purchasing a significant stake in the asset manager's Defense Industrials Active ETF. The timing of the inquiry, which came shortly before US and Israeli forces launched coordinated military action against Tehran, has drawn immediate scrutiny from financial analysts and ethics watchdogs alike.
The approach from the broker on behalf of the high-profile potential client was flagged internally at BlackRock, according to the FT report. BlackRock, Morgan Stanley and the Pentagon all declined to comment on the matter.
What Is the IDEF Fund?
The fund in question, which trades under the ticker IDEF on the Nasdaq, is a $3.2 billion equity vehicle that, according to BlackRock, pursues "growth opportunities by investing in companies that may benefit from increased government spending on defense and security amid geopolitical fragmentation and economic competition."
Its largest holdings include defence conglomerates RTX, Lockheed Martin and Northrop Grumman, all of which count the US Department of Defense as their single biggest customer, alongside data integration firm Palantir. The fund has risen 28 per cent over the past year, though it has shed nearly 13 per cent in the past month, suggesting it has not benefited from the immediate market reaction to the Middle East conflict.
Why the Investment Did Not Proceed
The transaction ultimately did not go ahead, albeit for administrative rather than ethical reasons. The IDEF fund, which only launched in May of last year, was not yet available on Morgan Stanley's client platform at the time of the inquiry. Although exchange-traded funds are designed to be as accessible as individual stocks, the sheer volume of such instruments, now exceeding 14,000 globally, means most major brokerages carry only a subset of available options.
It remains unclear whether Hegseth's broker subsequently identified an alternative defence-focused investment vehicle.
Hegseth's Role in the Iran Campaign
The financial questions arrive at a particularly sensitive moment. Pete Hegseth has been identified by President Donald Trump as the first member of his national security team to advocate forcefully for military action against Iran, and the Defence Secretary has been among the most vocal champions of the campaign within the administration.
A Pattern of Financial Scrutiny on Wall Street
The revelations are part of a broader pattern that has unsettled financial markets and regulators. Wall Street analysts have in recent months been closely examining trading activity in financial instruments and prediction markets in the lead-up to major decisions taken by the Trump administration, raising questions about the flow of non-public information.
ETFs have surged in popularity among individual investors owing to their lower fee structures, more favourable tax treatment compared with mutual funds, and the ease with which positions can be entered and exited.
Hegseth's Personal Finances
Hegseth's financial profile offers additional context. During his tenure at Fox News from 2022 to 2024, he earned $4.6 million in salary, according to a disclosure form submitted during his Senate confirmation process. That period also saw him collect nearly $500,000 in book advances, between $100,001 and $1 million in royalties, and close to $900,000 in speaking fees.
His most recent financial disclosure, released in June 2025, revealed that the Defence Secretary had sold stock in 29 separate companies, with individual sale values ranging from $1,001 to $50,000.
Pentagon's Denial and What Comes Next
The Pentagon's flat rejection of the Financial Times report does little to extinguish the broader ethical questions the story raises. Even though the investment attempt was ultimately aborted, the very fact that Hegseth's broker was prepared to pursue a multimillion-dollar position in companies whose fortunes are directly tied to Pentagon spending, at a moment when that same department was preparing a large-scale military operation, is likely to sustain calls for a formal review of the Defence Secretary's financial affairs.
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