Australia's biggest pension fund to sell remaining Russia assets

[MELBOURNE] AustralianSuper Pty will wind down its remaining Russian exposure after the nation's government said it expected its pension funds to divest Russian-linked assets.

The A$260 billion (S$259.7 billion) fund said in a statement it is "deeply concerned" about the unfolding events in Ukraine and has been "actively managing" its Russian exposure to address the changing and emerging risks.

The fund is in "full compliance" with all relevant sanctions, it said. The fund has reduced its exposure since June from 0.22 per cent to 0.07 per cent of total assets and "we will continue winding down the remaining exposure to divest our holdings in Russia as markets permit", the statement said.

Australia's government on Thursday (Mar 3) told custodians of the nation's A$3.5 trillion in retirement savings it expected they would divest their Russian holdings to complement sanctions imposed after President Vladimir Putin invaded Ukraine.

The request echoes Norway which told its wealth fund to divest its Russian holdings despite a fear it would be a "wrapped gift to the oligarchs" who would buy the shares.

Some of Australia's largest funds had already taken action. Australian Retirement Trust, the nation's second-largest pension, said it will sell all Russian, Ukrainian and Belarusian equity and debt exposure, while Australia's sovereign wealth fund said it will wind down about A$200 million in Russian investments. Further selling is expected after MSCI and FTSE Russell cut Russia from their emerging-market indexes.

Whether firms that have yet to divest can get their cash out remains to be seen. Russia's links with global markets are being severed with its foreign reserves frozen, while Moscow's capital controls and a ban on foreigners selling securities locally have shut the exit for international investors.

Australia's prudential regulator said it won't penalise funds if they sell assets at a significant loss despite their legal requirement to act in the best financial interests of their members. BLOOMBERG