SITTING in their offices high above New York's Park Avenue late on Monday, the private equity executives who own the country's largest gun company received a phone call from one of their most influential investors.
An official at the California teachers' pension fund, which has $US750 million invested with private equity firm Cerberus Capital Management, was on the line, raising questions about the firm's ownership of the Freedom Group, the gun maker that made the rifle used in the Connecticut school shootings. Hours later, in the early hours of Tuesday morning, Cerberus said it was putting Freedom Group up for sale.
"It is apparent that the Sandy Hook tragedy was a watershed event that has raised the national debate on gun control to an unprecedented level," Cerberus said.
The move by Cerberus is a rare instance of a Wall Street firm bending to concerns about an investment's societal impact rather than a profit-at-all-costs ethos.
Public pension funds like the Californian one have hundreds of billions of dollars in private equity and hedge fund investments. While their influence is vast, it is usually exerted behind the scenes and rarely prompts snap business decisions.
While concern from Cerberus' investors - as well as a swirl of media attention - had an impact on the decision to sell, the leadership of the private equity firm debated through the weekend how to respond to the tragedy and its potential fallout. Cerberus decided to make a clean break and sell the gun company.
"We believe that this decision allows us to meet our obligations to the investors whose interests we are entrusted to protect without being drawn into the national debate that is more properly pursued by those with the formal charter and public responsibility to do so," the firm said.
Cerberus, a private equity and hedge fund firm that manages more than $US20 billion, is owned by the billionaire financier Stephen Feinberg. His father, Martin Feinberg, lives in Newtown, Connecticut, where the shootings occurred.
Bloomberg News quoted the elder Feinberg as saying that the shooting was "devastating" and "horrendous, truly horrendous".
Cerberus said that it would retain a financial adviser to sell its interests in Freedom Group and then return the sale proceeds to its investors.