Divestment from Russia proves complicated for pension funds


Pension funds around the world are re-examining their investments in Russia’s energy, banking and mining sectors following the country’s invasion of Ukraine.

Norway’s largest pension fund, KLP Group; the Akademiker Pension of Denmark; and the pension systems of Connecticut and Rhode Island have announced plans to sell their holdings in Russia. Other U.S. pension funds, from New York to California, are providing updates on their investments in Russia amid a debate over whether the retirement savings of teachers and firefighters should be tied up in a country at war with its neighbour.

Selling the holdings, however, proves complicated. Some financial service providers are turning away from Russian securities, preventing investors from buying and selling ruble-priced stocks and bonds traded inside and outside Russia. Pension funds that hoped to sell assets traded on the Moscow Stock Exchange had to scrap those plans after Russia’s central bank closed the stock exchange on Monday.

Kiran Aziz, head of responsible investments at KLP, said the $70 billion fund had sold some holdings on the London Stock Exchange but was unable to sell others listed in Moscow.

Common pension fund investments around the world include Russian companies targeted by recent US sanctions, such as Sberbank.


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“The intention to sell is also intended to send a message of [a] responsible investment perspective, even if you are not able to immediately execute the transaction,” Ms. Aziz said.

Pensions in the United States and around the world hold Russian stocks in their international equity portfolios, with holdings representing perhaps 1% of total pension assets. Joint investments include Russian lenders Sberbank and VTB Bank, both targeted by recent US sanctions, as well as energy giant Gazprom PJSC.

U.S.-based companies are working to determine whether they should take action to comply with those sanctions, fund officials and advisers said.

Debates over pension fund divestment, which came to prominence as a protest against South African apartheid in the 1980s, have intensified in an increasingly globalized investment environment. Over the past year, several large pension funds have increased their target allocation to international equities, which made up a median of around 10% of public pension fund portfolios in December 2021, according to the Wilshire Universal Comparison Service. Trust.

Russians line up to use ATMs as ordinary citizens begin to feel the impact of Western allies’ sanctions on the country after Moscow invaded Ukraine. Meanwhile, the Moscow Stock Exchange remained closed on Tuesday. Photo: AP Photo/Dmitri Lovetsky

Many pension funds are already avoiding investments related to Sudan and Iran. In the United States, where the more than $4 trillion in assets of state and local government pension plans fall far short of the amount needed to pay promised benefits, some workers and retirees have backed down, arguing that Pension plan administrators should focus only on growing their retirement savings.

A November 2016 study of U.S. pension plans by Boston College’s Center for Retirement Research found that average annual returns in states with divestment requirements were 0.4 percentage points lower than plans in states with divestment requirements. States without these requirements. A 2001 decision by Calpers, the nation’s largest pension fund, not to invest in tobacco has cost the fund a cumulative $3.7 billion since then, according to analysis by a consultant l ‘last year.

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Pension systems that spin off from Russia can expect to sell at a significant loss, pension officials and other asset managers said. Russian stocks and bonds held by the Maryland State Retirement and Pension System, worth $68 billion, for example, had a market value of $96 million on Thursday, down from $197 million the previous week, the report said. funds.

Pension funds willing to take the loss could still find it difficult to unload their positions as countries impose sanctions and potential buyers and financial service providers turn away from Russian investments, said David Kotok, chief investment officer. at Cumberland Advisors, based in Sarasota.

“Selling in a market that’s closing, won’t buy, or has restrictions is one of the hardest things you can do,” Kotok said. “You need to have a payment mechanism that is not interrupted. Even if I’m willing to take 10 cents on the dollar…how am I paid? »

—Preeti Singh contributed to this article.

Invasion of Ukraine by Russia

Write to Heather Gillers at [email protected]

Corrections & Amplifications
Kiran Aziz is Head of Responsible Investments at KLP Group. In an earlier version of this article, Ms. Aziz’s courtesy title was incorrectly given as Mr. (Corrected March 2.)

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