JPM and Liontrust Russia Suspended, Shell Bins Gazprom Plant

A raft of dramatic gatings and exits hit the newstands on Monday evening, after a tense day of peace talks between Russia and Ukraine

Ollie Smith 04.03.2022
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Red Square

Two funds investing in Russia were suspended by managers on Monday afternoon, amid the ongoing investor reaction to the country’s war in Ukraine.

The management team on Liontrust’s Russia fund said the strategy would be suspended for the foreseeable future. It gave no indication of when the gating would lift.

“We have not taken this action lightly, but in this case we believe this is in the best interests of all investors given the events of the past few days and comes after discussions with the fund’s depositary,” the company said.

“These events include today’s closure of the Moscow Stock Exchange and the temporary ban on foreign investors selling local Russian securities.

“At the moment, Liontrust is unable to say how long the fund will be suspended for. Liontrust will keep the suspension of the Russia Fund under continual review given it is such a rapidly changing situation and we will update investors as soon as we can.”

As that news was breaking, oil major Shell announced it would be exiting its Russian operations, and specifically the Sakhalin 2 LNG plant. Shell holds a 27.5% stake in the site, which is controlled by Gazprom via its own 50% stake.

Alongside the Liontrust suspension came two further suspensions from JPMorgan Asset Management, which gated its Russia and European Equity strategies. Both will remain closed until further notice.

"This was in response to the escalating conflict between Russia and Ukraine and challenges around calculating NAV amid impaired market trading conditions," JPMorgan said.

"At this point, it was unclear for how long the suspension would last, but it would be reviewed on a regular basis. We believe this to be in the interests of existing shareholders, and there are no changes to the Morningstar Analyst Ratings of the two strategies.

"We do not expect any changes to the investment philosophy as a result of this announcement. We will provide further updates in due course."

Jonathan Miller, director of manager ratings and research for Morningstar, said Russia investors faced a rapidly changing landscape.

"Things have moved so quickly. When it comes to Russian equities, you can now only really deal in names that have a listing outside the country," he said.

"For instance, Sberbank has a listing in the UK, though it is down 73% today. In the grand scheme of things, assets are small in Emerging Europe and dedicated Russia funds. From a wider market perspective, moreover, Russia makes up just 1.7% of the emerging markets index."

 

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Ollie Smith  is editor of Morningstar UK.

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