Fund Manager Responses to the Ukraine Crisis. By Laetitia Peterson.
In response to the Russian invasion of Ukraine, Western governments have united in implementing punitive sanctions on Russia, including:
Sanctions on Russia’s main development bank and its military bank, and enacting comprehensive curbs on Russia’s sovereign debt, a move intended to cut off the country from Western financing.
Removal of large Russian banks from Western financial markets and removing some Russian banks from the SWIFT financial messaging system, essentially barring them from international transactions.
Sweeping restrictions on technological imports.
Freezing trillions of dollars in Russian assets, enacting a crackdown on the Russian elite and their families.
Sanctions aimed at Russian oligarchs freezing their assets.
Imposing new restrictions on Russia’s central bank to prevent it from using its large international reserves.
Sanctions on the Russian Direct Investment Fund, a sovereign wealth fund that is run by a close ally of Vladimir Putin.
The aim of the sanctions is to make Russia’s invasion of the Ukraine as expensive as possible whilst avoiding a direct military confrontation2.
The Russian share market, as measured by the MSCI Russia Index (gross div.), is down 60% from its most recent high in October 2021, including being down 53% in February alone. On 24 February, the Moscow Stock Exchange suspended trading until further notice. There are also several Foreign Depositary Receipts3 (FDR’s) traded on the New York and London stock exchanges enabling foreign investors to gain exposure to Russian listed companies. The FDR’s have seen their prices decimated (e.g. Sberbank -90%, Gazprom -75%) at 20 to 50 times the normal trade volumes, as foreign investors are unwinding their positions in Russian stocks.
So, what are we doing to manage and reduce any exposure to Russian assets in our client portfolios?
Across our portfolios we have four managers with exposures to Russian companies in their funds. This exposure, however, is minimal, ranging from 0.02% to 0.32%. In other words, a current exposure of just 2 cents to 32 cents for every $100 invested.
The Russian invasion has led many fund managers to review their investment approach to reduce and/or eliminate their exposures to Russian companies. This is a dynamic situation with new sanctions and fund manager policy changes coming out daily. Our Investment Committee at Consilium is monitoring the situation carefully.
Information gathered from https://www.nytimes.com/article/russia-us-ukraine-sanctions.html
A depositary receipt is a certificate issued by a bank representing shares in a foreign company (for example Russian bank Sberbank, or Russian energy corporation Gazprom) traded on a local stock exchange (for example the New York or London exchanges).