April 18 (Reuters) - American financial institutions

facilitated investments worth billions of dollars in index funds

that included several blacklisted Chinese companies, according

to a bipartisan House Committee investigation.

The firms funneled $6.5 billion last year to some 63 Chinese

companies flagged by the U.S. government, the probe report

unveiled on Thursday said.

Ties between the U.S. and China, the world's two largest

economies, have been strained in recent years due to issues

including Taiwan, the origins of the COVID-19 pandemic,

allegations of spying, human rights issues and trade tariffs.

The Select Committee said it focused on two companies - the

world's foremost index provider, MSCI ( MSCI ), and the world's

largest asset manager, BlackRock ( BLK ),- and also canvassed

the broader financial industry.

The committee, in its report, concluded that MSCI ( MSCI ) indexes

alone channeled $3.7 billion and BlackRock ( BLK ) invested at least

$1.9 billion in these red-flagged entities.

"BlackRock ( BLK ) and MSCI ( MSCI ) are not alone - a cross-industry review

revealed that other major index providers and asset managers

funnel billions of dollars to the same red-flagged entities,"

the report said.

The panel, however, said the activity was not illegal.

"The Committee and its report confirm BlackRock ( BLK ) complies

with applicable US laws, this matter affects the entire asset

management industry, and that Congress and the Administration

must work together to create clear rules of the road for U.S.

investors," a BlackRock ( BLK ) spokesperson said in a mailed statement

to Reuters.

"Despite fully cooperating with the Committee for more than

eight months, its report includes misleading assertions about

index funds, including that they are 'funneling billions of

dollars' to these entities," the spokesperson added.

MSCI ( MSCI ) did not immediately respond to requests for comment and

the committee could not be immediately reached.