Asset managers with ties to Russia will be forced to close their funds permanently
Danske, Nordea, and Jupiter have taken steps to permanently close funds with significant exposure to Russia, the latest sign that investors do not expect Russia to return to global markets for many years.
Since early March, when President Vladimir Putin invaded Ukraine, most funds with significant holdings in Russian securities have been frozen. After Moscow's markets were shut down and offshore asset prices plummeted, the suspensions trapped billions of dollars worth of investor capital.
A slew of punitive Western sanctions and Russian retaliation measures, including a ban on foreigners trading on the Moscow Exchange, have made valuing and trading positions nearly impossible.
Danske Bank's investment arm said it started liquidating its three Russia and Eastern Europe funds at the end of April. "Given the escalation of the conflict and challenges with the liquidity and settlement of the funds’ investments, we do not consider reopening the funds to be in the best interests of shareholders, so this is not being contemplated," Danske said.
The value of the funds' assets was low and not expected to increase in the near future, while the company would bear the cost of liquidation, according to Danske.
Nordea Funds also announced that it would liquidate its Russia fund and exit all investments related to Russia, with the first payout to unit holders scheduled for August 31. "Depending on the market situation and restrictive measures imposed, such as sanctions," Nordea warned, "it will take a long time before all holdings of the fund can be sold."
Jupiter Asset Management announced in the United Kingdom that it had applied to regulators to close its Emerging Europe fund and that, if approved, it would liquidate the fund. Carnegie Fonder, a Swedish asset manager, will only allow sales of units in its Russia funds once trading has resumed. Swedbank said it would "not offer its Rysslandsfond [Russia fund] in the longer term" and would sell its Russian holdings as soon as the market permitted.
"“As long as the market is closed it is difficult to make any further decisions regarding the future of the fund, especially as the bulk of the fund is owned by Swedish pensions savers," Carnegie Fonder stated, "it is our legal responsibility to do what we can to preserve their savings."
"However, as it is now impossible to see a promising future for Russia, and impossible to make an adequate analysis of the Russian financial market and Russian companies, we have decided to close the fund for new investments."
At the end of 2021, foreign investors ranging from hedge funds to pension funds held about $170 billion in Russian assets. Since the invasion, asset managers such as JPMorgan, BlackRock, Amundi, UBS, BNP Paribas, Abrdn, Schroders, and Pictet have all frozen Russia-focused funds, but have not stated whether they will remain closed indefinitely.
By fLEXI tEAM