Amundi, Pictet Join Firms Freezing Billions in Funds Worldwide
(Bloomberg) -- More than a dozen funds managing at least $3 billion have been frozen as the fallout from Russia’s invasion of Ukraine reverberates through financial markets.
Pictet Asset Management and Amundi SA were among the latest firms to tell investors they had suspended activities or restricted them from accessing funds invested in Russian securities. Pictet’s $637 million Russian equities money pool was down 42% this year through Friday.
“Due to the serious dysfunctioning of the Russian securities markets, normal market trading conditions cannot be guaranteed,” Amundi said in a statement.
The moves followed sharp declines in financial markets, and many of the funds that were frozen have incurred losses of more than 30% this year, hit by fresh sanctions designed to isolate Russia. The measures include preventing its central bank from accessing foreign reserves and barring some Russian lenders from the SWIFT messaging system.
|Sources: Fitch Ratings, Bloomberg|
Index providers such as MSCI Inc. are seeking feedback on whether to strip Russia from its stock indexes. Intercontinental Exchange Inc. said it will remove debt issued by sanctioned Russian entities from its fixed-income indexes at the end of the month. JPMorgan Chase & Co. is planning to exclude Russian debt from some of its sovereign bond indexes.
Those changes have the power to impact asset mangers more broadly. Many exchanged-traded funds and passive tracker funds follow indexes and have to make changes to their holdings when the index provider alters the composition of benchmarks.
On Tuesday, BlackRock said it indefinitely suspended the creation of new shares in its iShares MSCI Russia ETF. It also warned that the ETF may deviate from its investment objective, experience tracking error and trade at a discount to its net asset value.
Overseas investors owned about $86 billion of Russian equities at the end of last year, according to data from the Moscow Exchange. Most are now unable to liquidate or properly trade their holdings after Moscow banned brokers from selling securities held by these funds. Almost $13 billion of Russian stocks owned by U.S.- and Europe-based funds is now in sanctioned companies, Bloomberg Intelligence estimates.
Stopping investors from accessing their money from daily dealing funds is rare, even in the wake of broad macro events.
Reserve Management Corp. delayed redemptions from a cash pool during the financial crisis. Credit Suisse Group AG and Nomura Holdings Inc. liquidated investment products that made bets against market volatility in February 2018. Several U.K. property funds stopped client withdrawals after the Brexit vote in 2016, and again during the pandemic in 2020.
The effects of the sanctions are already rippling through boardrooms worldwide, and many corporate executives have concluded that the benefits of ties with Russian firms aren’t worth the reputational and financial risks.
For some asset managers the country is uninvestable. Abrdn Plc won’t invest in Russia or Belarus for the foreseeable future, according to a statement Tuesday from the Edinburgh-based asset manager.
Abrdn clients have not rushed to yank money from funds exposed to Russia, according to Chief Executive Officer Stephen Bird.
“It’s never a good time to be selling when the cannons are firing -- that’s typically the stance of a professional investor,” he said in an interview with Bloomberg Television. Bird said Abrdn has about 0.5% of its assets tied up in Russia, Belarus and Ukraine, adding that while the firm’s first concern was the human impact of the war, “from a financial standpoint, we’re actually minimally exposed.”
©2022 Bloomberg L.P.