Some pension funds want to shed Russian assets, but securities firms are shying away from the country’s stocks and bonds, making sales difficult.
U.S. pension funds want to do the right thing in light of Russia’s aggression and unload their investments there.
But that’s not so easy, The Wall Street Journal reports.
That’s because securities firms are steering clear of Russian stocks and bonds, making it difficult for investors to sell them. And the shutdown of the Moscow Stock Exchange on Monday obviously made it impossible to jettison stockholdings there.
Connecticut and Rhode Island government pension funds have stated their intention to get rid of their Russian holdings, The Journal reports. And funds in other states are thinking of doing the same.
Major U.S. companies are cutting their involvement with Russia, too, including Apple (AAPL) – Get Apple Inc. Report, Exxon Mobil (XOM) – Get Exxon Mobil Corporation Report and Boeing (BA) – Get Boeing Company Report.
Meanwhile, the shuttering of the Moscow exchange has turned the two main Russian-stock ETFs traded in the U.S. into a de facto Russian stock market.
The two exchange-traded funds are the VanEck Russia ETF (RSX) – Get VanEck Russia ETF Report, with assets of $278 million, and the iShares MSCI Russia Capped ETF (ERUS) – Get iShares MSCI Russia ETF Report, with assets of $70 million.
The Van Eck fund is based on the MVIS Russia Index, and the iShares fund on the MSCI Russia 25/50 Index.
The Van Eck fund has given up 68% since Feb. 16 and is down 1% on Wednesday. The iShares fund has cratered 71% since Feb. 16 and is down 0.3% Wednesday.
With the stocks underlying the ETFs currently not trading, the ETFs provide the best estimation of the stocks’ values. And the war is pushing down those values and thus the ETFs as well. This demonstrates the power of ETFs.
“The ETF has proven itself time and time again, especially around geopolitical events when liquidity is difficult to access,” Athanasios Psarofagis, a Bloomberg Intelligence ETF analyst, told Bloomberg.
“ETFs are supposed to be index trackers, but when that process breaks down, they take on the role of price-discovery vehicles — and it’s impressive how accurate they have been.”
