Australia’s second-biggest superannuation fund, the $230bn Australian Retirement Trust, has joined the wave of investors fleeing Russia after the invasion of Ukraine.
The fund, which has about 2 million members and was formed on Monday through the merger of Sunsuper and QSuper, said it gave instructions to sell its Russian shares “earlier this week”.
The Morrison government said on Thursday it had a “strong expectation” that Australian super funds would divest from Russia.
Russia was on Thursday kicked out of a key index that fund managers use to guide their investments after index provider MSCI said the country’s market was “uninvestable”.
Australia’s sovereign wealth fund, the Future Fund, as well as the New South Wales government and big super funds Aware, Rest and Cbus have all pledged to divest from Russia as soon as possible.
“The government welcomes the voluntary actions taken to date by some superannuation funds to divest their Russian assets,” the federal treasurer, Josh Frydenberg, and the minister for superannuation, Jane Hume, said in a joint statement.
“While Australian superannuation funds only have a small exposure to Russian investments in the context of the $3.5tn superannuation system, it is important that Australia sends a clear and unequivocal signal that we condemn in the strongest possible terms Russia’s unprovoked and unjustified attack on Ukraine.”
The statement poured additional political pressure on Australia’s biggest fund, AustralianSuper, which has been criticised by activist investors for refusing to disclose what it intends to do with hundreds of millions of dollars in Russian assets.
The Australian government on Wednesday slapped sanctions on Russia’s central bank, making it impossible for it to increase its holding of about $8bn worth of Australian government bonds.
Frydenberg has said the government will continue to pay interest on the bonds. A government source said the payments would be made to European clearing house Euroclear, but would not travel on to the Russian central bank due to sanctions in Europe.
ART’s chief investment officer, Ian Patrick, said the fund had “instructed its investment managers earlier this week to sell any remaining debt and equity investments and not to make any new investments in either Russia, Ukraine, or Belarus, which has now entered the conflict alongside Russia”.
“In some cases, this may prove challenging, given that some key markets remain closed or difficult to access.”
The Moscow stock exchange has been closed since Monday and Ukrainian media reports it will remain closed on Thursday.
Patrick said QSuper and Sunsuper’s investments in Russia “were very limited prior to the onset of the crisis”. Sunsuper had less than 0.2% of members’ funds invested in Russian stocks and less than 0.1% in Russian bonds, while QSuper had no Russian investments at all, he said.
The removal of Russia from MSCI’s emerging market indexes is likely to force the hand of some fund managers who have so far held back from dumping shares in the country’s companies from their portfolios.
In a statement, MSCI said the decision followed consultation with institutional investors and will take effect from next Wednesday.
“During the consultation, MSCI received feedback from a large number of global market participants, including asset owners, asset managers, broker dealers, and exchanges with an overwhelming majority confirming that the Russian equity market is currently uninvestable and that Russian securities should be removed from the MSCI Emerging Markets Indexes,” MSCI said in a statement.
“Consultation participants highlighted several recent negative developments that led to a material deterioration in the accessibility of the Russian equity market to international institutional investors,” it said.
AustralianSuper again declined to comment on its Russian holdings on Thursday.
The fund’s public disclosures reveal it had a portfolio of Russian investments, including shares in Russia’s biggest bank, Sberbank, that before last week was valued at more than $300m.
However, shares in Sberbank, which were valued by Aussie at almost $140m, have now become close to worthless after sanctions wiped out the company’s European business.
It is believed that by the end of last week the fund had disposed of some Russian assets, reducing its total exposure to about $120m, but retains shares in Sberbank.
Hospitality sector fund Hostplus has also disclosed it holds Sberbank shares, worth $49.2m as of 30 September.
However, a spokesperson said the $76bn fund currently had direct holdings of Russian stocks and bonds totalling just $19m.
“We continue to work with our existing managers across our investment portfolios and continue to monitor the impacts of this evolving situation especially in light of the Russian Central Bank ordering market players to reject attempts by foreign clients to sell Russian securities,” the spokesperson said.
