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Asset Owners Move to Divest From Russia After Ukraine Invasion

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Global asset owners are considering the future of their investments in Russian securities. 

As state governors in the U.S. announce plans to divest from Russia, public pension plans are evaluating how they will be affected. On Saturday, Glenn Youngkin, the governor of Virginia, called for decisive action in support of Ukraine after Russian President Vladimir Putin invaded the country last week. Among the demands, Youngkin called on the Virginia Retirement System’s Board of Trustees and the state’s university endowment funds to divest from all holdings of the Russian Ruble and securities of Russian companies. 

“As of February 24, VRS has extremely limited investments in Russia,” Jeanne Chenault, public relations director at VRS, told Institutional Investor in an email. “VRS is aware of the governor’s request and is carefully reviewing the federal mandates. We plan to take appropriate action as required. VRS will, of course, comply fully with federally imposed sanctions.” 

In Colorado, Governor Jared Polis announced state-wide sanctions against Russian securities, pushing the Colorado’s Public Employees Retirement Association to re-allocate its identified $8 million of investments in Russian banks, utilities and oil companies, and gas producers to non-Russian entities, according to a Colorado Public Radio report

Other states, like New Jersey, Illinois, New York, Georgia, and Rhode Island have proposed similar campaigns. On Monday, Rhode Island General Treasurer Seth Magaziner said his office is aiming to liquidate all of the state pension fund’s investments in Russian stocks and bonds, the Boston Globe reported

In Georgia, Governor Brian Kemp’s administration said the state will fully divest from Russia. While the guidelines and definition of divestment remain unclear, the Atlanta Journal-Constitution reported that the measure will include greater scrutiny of the portfolios of Employees’ Retirement System of Georgia and the Teachers Retirement System of Georgia. The AJC reported that ERSGA is invested in the iShares MSCI Russia ETF, an exchange-traded fund  that includes mostly Russian basic materials, energy, and financial sector companies.

In New York City, meanwhile, comptroller Brad Lander said in a Sunday statement that he plans to “bring specific assets to the trustees of the five boards of the New York City Retirement Systems to consider for divestment.”

Many of the country’s pension plans have relatively small allocations to Russian securities. For example, at the Teachers’ Retirement System of Texas — with its $204 billion in assets under management — investments in Russia and Ukraine are almost entirely made through public equity markets. Russia public equity comprises 0.3 percent of the total trust benchmark.

At the Teachers’ Retirement System of Illinois, allocations to Russian securities occupy less than 1 percent of the fund’s total portfolio — approximately $246 million of the fund’s $65 billion in assets.

“Any commitments we make to Russian firms are part of our international equity portfolio,” Dave Urbanek, TRS Illinois’ public information officer, told II. “And it just so happens that — and I’m sure that other pension funds find the same thing — the best opportunities are elsewhere.” 

Last week, the Illinois House Republican Leader Jim Durkin announced that he plans to introduce legislation to divest Illinois from any Russian companies or assets, the Wall Street Journal  reported

Elsewhere in the world, pension schemes and sovereign wealth funds are spearheading their own divestment campaigns. The world’s largest sovereign wealth fund — Norway’s $1.3 trillion system — announced it will divest its Russian assets, resulting in an impending reallocation of around $2.83 billion, Reuters  reported

In Canada, the country’s second largest pension fund — Caisse de depot — divested all of its positions in Russia immediately following last week’s invasion, Reuters reported

Australia’s sovereign wealth fund also announced it will “wind down” its investments in Russia, according to a Crickey report

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