Stuck in a rut

2 Mar 2022 By Karen Kwok, Peter Thal Larsen Follow @KarenKKwok

Western funds worth over $4 bln have suspended redemptions after Moscow froze equity trading, while MSCI may kick the country out of its emerging market benchmarks. The crisis once again exposes the flimsiness of asset managers’ promise that customers can sell when they want.

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Asset managers including Amundi, HSBC, BNP Paribas and Switzerland’s Pictet on March 1 said they had suspended dealings in funds containing Russian equities. Ratings agency Fitch has identified 11 Russia-focused funds which have been suspended, with total assets under management of 4.4 billion euros ($4.9 billion) at the end of January.

JPMorgan Asset Management suspended its Russia Equity Fund and Emerging Europe Equity Fund with immediate effect, the company said in a letter to its investors on Feb. 28. This prevents investors from redeeming, switching or buying shares in the funds.

Index provider MSCI on Feb. 28 said it was seeking feedback from market participants on how to treat Russian equities in its indexes. MSCI said one option was to reclassify the MSCI Russia Indexes as so-called standalone markets, removing them from the company’s Emerging Markets benchmarks.

MSCI’s head of index research Dimitris Melas said in an interview with Reuters that Russia’s stock market is “uninvestable” after stringent new Western sanctions and central bank curbs on trading, making a removal of Russian listings from indexes a “natural next step”.

Russia accounted for 1.6% of the MSCI emerging markets equities index as of Feb. 28.

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Russia accounted for 1.6% of the MSCI emerging markets equities index as of Feb. 28.

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