More than 20 European investment funds, including nine domiciled in Luxembourg, have temporarily suspended sales and redemptions following Russia’s invasion of Ukraine, according to the credit ratings agency Fitch.
“We have identified 24 suspended funds so far,” Alastair Sewell, Fitch’s head of fund and asset manager ratings for EMEA and APAC, told Delano on Monday. “We believe there will be more. However, we have not--yet--been able to obtain shareholder notices confirming the suspension.”
Collectively the 24 European funds that have been ‘gated’ had assets under management of roughly €4.7bn in January 2022. That number fell to a figure that is estimated to be more than €2.6bn in February 2022. The value is somewhat higher than €2.6bn, but difficult to determine due to gaps in the data.
The nine gated Luxembourg-domiciled funds had assets under management of €2.4bn in January 2022, which fell to nearly €1.4bn in February 2022, data provided to Delano by Fitch showed.
The precipitous drops in net asset values, combined with western sanctions on Russia’s financial sector leading to Russian counter-restrictions, led the asset managers to freeze the funds.
“In the current circumstances we believe all Russia-focussed funds will now be suspended,” Sewell stated. He said that Fitch did not track any Ukraine-focussed funds, so was not aware of any that had been gated.
Blackrock BGF Emerging Europe Fund
Blackrock suspended all share sales, switches and redemptions in its Blackrock BGF Emerging Europe Fund on 1 March. “We also have proactively advocated with our index providers to remove Russian securities from broad-based indices,” Rich Kushel, head of Blackrock’s portfolio management group, and Salim Ramji, global head of Ishares and index investments at Blackrock, said in a media statement. “Russian securities today account for less than 0.01% of our clients’ assets, mostly in our index portfolios.” They added: “We will continue actively consulting with regulators, index providers and other market participants to help ensure our clients can exit their positions in Russian securities, whenever and wherever regulatory and market conditions allow.”
Danske Invest SICAV Russia
Danske Bank suspended trading in its Danske Invest SICAV Russia fund on 28 February. It stated: “Due to the war in Ukraine and the Russian Central Bank’s decision to close the Russian stock market, Danske Invest has been forced to suspend trading in the equity funds that have a significant weight of Russian equities in the portfolio. How long the suspension will last, depends on the development in the Russian stock market. We are monitoring the situation carefully but due to the uncertainty of the situation, there is an increased risk that the funds may be entitled to further suspensions in the period ahead.”
DWS Russia & DWS Russia Bond Fund
DWS said its DWS Russia fund had been suspended on 1 March, “to ensure an equal and fair treatment of all investors, as there is currently no sufficient market liquidity.” The fund firm explained to shareholders that: “Due to the extremely volatile and constantly changing market situation and already imposed and planned comprehensive sanctions on Russia, a valuation of securities of issuers domiciled in Russia or such with business focus in Russia can no longer be guaranteed.” It stated that “the suspension will be reviewed on a regular basis.”
Its DWS Russia Bond Fund was frozen for the same reasons on 26 February. Its suspension will similarly “be reviewed on a regular basis.”
East Capital Russia Fund
East Capital suspended its East Capital Russia Fund on 1 March “until further notice”. It told shareholders: “The Central Bank of Russia has temporarily restricted brokers from selling securities at instruction of non-residents from 28 February 2022. We also note generally increased difficulties to execute trades on the Russian exchanges. This is due to, among other factors, currency clearing limitations and restrictions introduced on short selling also impacting funds’ abilities to trade as well as the availability of brokers in a position to execute trades in the current market conditions. All these circumstances combined make it prudent to suspend the fund dealing until we, according to our best judgement, can execute trades in the best interest of our investors.”
JPM Russia
JPMorgan suspended its JPM Russia fund on 28 February. The move was taken “in order to protect the interests of our shareholders,” JPMorgan told Delano on 7 March. “We are closely monitoring the risks and remain focused on acting in the best interests of our clients and shareholders, at all times, as part of our fiduciary duty. The suspension will be reviewed on an ongoing basis.”
Pictet-Russian Equities
Pictet suspended trading in its Pictet-Russian Equities fund on 28 February. Delano has asked Pictet for comment.
UBS (Lux) Equity SICAV - Russia (USD)
UBS froze its UBS (Lux) Equity SICAV - Russia (USD) fund on 25 February. UBS said in a statement: “In light of current events, it is not possible to calculate the fund’s net asset value (NAV). Accordingly, to protect the interests of all investors, the fund board has taken the decision to temporarily suspend subscriptions and redemptions.” Its shareholder notice said it would “inform the shareholders as soon as the situation has changed in a way that the sub-fund’s assets can be disposed under normal conditions without seriously harming the interests of the shareholders so that the suspension can be lifted.”