Super funds seek prompt exit from Russian assets

Superannuation funds have been told they will not face regulatory action if they seek to divest Russian assets, although closure of the Russian stock market is making it difficult for funds to exit assets quickly.

The Australian Prudential Regulation Authority (APRA) issued a statement and said Russian assets made up a “very small proportion” of total superannuation assets.

“APRA will not be taking any action against trustees who seek to divest Russian assets in this context where trustees have considered such divestments in accordance with their duties.”

This was backed by the Financial Services Council (FSC) who said it would develop guidance for superannuation trustees and fund managers to help them:

• implement all sanctions imposed on Russia by Australia;
• eliminate new investments in Russian assets by superannuation funds;
• review their portfolios with a view to winding down exposures to Russian assets not currently subject to divestment sanctions as market conditions permit; and
• have appropriate compliance resources to achieve these objectives.

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Several funds including Australian Retirement Trust, Cbus and Aware Super had issued statements on their policy regarding Russian assets. While they were underweight the country in their portfolios, they said the closure of the Moscow Exchange (MICEX), which had lasted four days so far, was making it difficult to take action.

Ian Patrick, chief investment officer at Australian Retirement Trust, said: “Australian Retirement Trust has 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 doing so, investment managers have been instructed to ensure adherence to all legal requirements imposed by Australian law and other relevant sanctions regimes.

“In some cases, this may prove challenging, given that some key markets remain closed or difficult to access. We cannot rule out having some minimal exposure despite the best endeavours of our managers; nor can we rule out the likelihood that some of the companies Australian Retirement Trust invests in may have some exposure to assets in the affected countries. However, we certainly expect those companies to manage their businesses in accordance with all relevant sanctions and applicable laws.”

Australian Retirement Trust said it had less than 0.2% in its Super Savings account and none in its QSuper account.

A statement from Aware Super said: “We took immediate steps to sell down our direct exposure to Russian assets in our portfolio last week. We had identified an extremely small direct exposure to Russian assets of around 0.03% of our funds under management. 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.”

A spokesperson for Cbus said: “We have been underweight the benchmark in Russia within our emerging market equities asset class and at an overall fund level have very limited exposure (approximately 0.1% of total assets). This will continue to be reduced when practical and we are continuing to monitor the situation closely. We do not hold any Russian bonds".