Institutional investors may no longer have the option to proactively distance themselves from Russia after the government starting applying pressure on superannuation funds to divest their Russian assets this week.
In a joint statement on Thursday evening, Treasurer Josh Frydenberg and superannuation minister Jane Hume said the government expects super funds to take steps toward Russian divestment.
“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 read.
“The actions of Australia’s superannuation funds to divest of Russian assets will complement the range of sanctions imposed by the Government to exert pressure on Russia, in alignment with our international partners.”
The prudential regulator gave superannuation funds the OK to divest Russian assets, as long as it fit trustee guidelines.
In response to the Government’s statement, APRA stated that it will not take any action where “trustees have considered such divestments in accordance with their duties”.
“Data provided to APRA indicates that superannuation fund holdings of Russian assets are a very small proportion of the $3.5 trillion superannuation asset pool,” APRA noted.
Some institutional investment managers took the early lead to distance their organisations from Russia after the invasion commenced on 24 February, but several are playing catch up.
By the end of February, the Future Fund had implemented all sanctions imposed by Australia, the US and EU.
“We have devoted significant resources to compliance and will continue to do so as additional sanctions are announced,” it said in a statement.
“The fund holds around 0.1 per cent of the Fund or around $200 million in companies listed on the Russian stock exchange.”
The Future Fund had no holdings in Russian sovereign debt or other fixed income.
“We will be winding down the remaining exposure (which is not currently subject to divestment sanctions) as market conditions permit.”
Australian Retirement Trust, the newly-merged entity of QSuper and Sunsuper, said in a media release it instructed its investment managers to divest from Russia earlier this week but market closures to Russian stock markets created an obstacle.
It noted Russian shares accounted for 0.2 per cent of ART Super Savings account assets, while debt exposure was less than 0.1 per cent.
John Pearce, UniSuper chief investment officer, said the fund currently has no direct exposure to Russia or Ukraine.
“We condemn the illegal invasion of Ukraine by Russia,” Pearce said. “Earlier this week we divested from the very small indirect exposure our fund had to Russia through one of our external managers.”
David Elia, Hostplus chief executive, said the hospitality industry fund is committed to divesting its remaining direct holdings in Russia.
“At present, Hostplus has a limited exposure in Russia which represents a very small proportion of total investments we hold,” Elia said. “We currently have direct holdings of $10 million in a $76 billion portfolio.
“This direct holding has reduced from the $19 million reported earlier this week and reflective of our ongoing commitment and action to fully divest.”
A spokesperson for Aware Super said the fund took immediate steps to sell down direct exposure to Russian assets in its portfolio last week.
“We had identified an extremely small direct exposure to Russian assets of around 0.03 per cent of our funds under management,” Aware stated.
“We have no direct exposure to Ukraine. We’re also issuing instructions to all the asset managers we work with to ensure no new investments in Russia come into our portfolio.”
An AMP spokesperson said AMP Superannuation and AMP Capital have minimal exposure to Russian investments and are implementing measures needed to comply with all relevant sanctions.
Insignia Financial (formerly IOOF) said it has no direct exposure and only minimal exposure through external managers to Russian assets.
“We are actively working with our investment managers to take action on these positions as market conditions permit,” a spokesperson said.
Complying with sanctions
Retail fund CFS confirmed in a statement it is working with its investment managers and will comply with all sanctions imposed on Russia in Australia and its current exposure is only 0.1 per cent.
Retail industry fund REST published an investment update stating Russian exposure is only 0.1 per cent of total assets in its Core Strategy option, as of 24 February.
“Rest intends to divest any direct portfolio holdings of Russian securities in accordance with our members’ best financial interests and regulatory sanctions,” it said.
A HESTA spokesperson said its investment team has already instructed its partners to remove holdings of Russian assets and have prohibited future investments.
“These holdings represent a very small part of the portfolio and we hold no physical assets in Russia,” the spokesperson said.
AustralianSuper said in a statement that the fund was “deeply concerned about the events unfolding in Ukraine” and was in “full compliance with all relevant sanctions and, in accordance with our portfolio management approach, has been actively managing our exposure to Russian assets to address changing and emerging risks.
“Since June 2021 we have reduced the Fund’s exposure to Russian investments by nearly two thirds from 0.22 per cent to around 0.07 per cent of total assets. We will continue winding down the remaining exposure to divest our holdings in Russia as markets permit.”
A spokesperson for construction industry fund Cbus said it has followed the sanctions put on Russia and continue to seek to exit positions where possible.
“Separately to these sanctions regimes, since 2018 Cbus took additional action to limit purchases of Russian securities,” the spokesperson said. “We are mindful of geopolitical risks when making investment decisions.”