JPMorgan, Danske Bank Freeze Funds Exposed to Russian Assets
JPMorgan, Danske Bank Freeze Funds Exposed to Russian Assets
(Bloomberg) -- JPMorgan Chase & Co. and Danske Bank A/S were among asset managers to freeze funds with exposure to Russian equities amid a plunge in markets.
JPMorgan Asset Management said clients won’t be able to buy or redeem shares in the JPM Emerging Europe Equity fund or its Russia fund, according to a statement Monday. Danske Invest Management said it is suspending trading in its Eastern European fund, while Liontrust Asset Management Plc said on Monday it is halting withdrawals and purchases of its Russia fund until further notice.
“Due to the escalating conflict between Russia and the Ukraine, local market trading conditions are not currently operating as they normally would do,” JPMorgan said in a letter to investors of the Emerging Europe fund. “We understand that being unable to deal in the fund is frustrating and we will take the decision to lift this suspension as soon as we consider it is in the best interests of existing shareholders to do so.”
The moves occurred during a turbulent day for financial markets after a new wave of sanctions against Russia for invading Ukraine were unveiled over the weekend. Countries across the globe moved to isolate Russia from global finance by introducing measures including preventing its central bank from using much of its foreign reserves and excluding some Russian banks from the SWIFT messaging system that facilitates trillions of dollars worth of transactions.
Russia attempted to shield its economy and took steps including banning brokers from selling securities held by foreigners.
JPMorgan’s Russia fund is down 21% this year before Monday, while its Emerging Europe Equity fund was down 22%. Danke’s fund fell almost 34% this year through Friday. The Liontrust Russia fund is down 24% this year.
The new sanctions hammered funds managed by some of Europe’s largest asset managers including Amundi SA and Schroders Plc, where strategies were either focused solely on Russia or had heavy exposure to companies based in the country. More funds are expected to follow suit and shut their doors to redemptions.
New York-based Voya Financial Inc. warned investors on Monday that the sanctions and the threat of further restrictions on Russia may require its Russia-focused fund to freeze investments. The fund, which normally invests at least 80% of its assets in Russian equities, has declined 44% this year to Feb. 25.
The Schroder ISF Emerging Europe fund, which oversees 576 million euros and has 55% exposure to Russian companies, is down 35% this year, according to data compiled by Bloomberg. A Russia-focused Lyxor exchange traded fund, now managed by Amundi, is down more than 60% year to date, Bloomberg data show.
“If a fund is a daily dealing fund, it will need to produce a daily net asset value.” Jonathan Miller, director of manager research ratings at Morningstar said. “Given how things stand, it could prove tricky. The last resort, would be to suspend dealing.”
Stopping investors from accessing their money from daily dealing funds is rare, even in the wake of broad macro events.
U.S.-based Reserve Management Corp. delayed redemptions from a cash pool during the financial crisis. Credit Suisse Group AG and Nomura Holdings Inc. liquidated investment products that made bets against market volatility in February 2018. Several U.K. property funds stopped client withdrawals after the Brexit vote in 2016, and again during the pandemic in 2020.
Russian equities made up 0.27% of long-term European assets in funds and ETFs, or 32.8 billion euros ($36.8 billion) of the 12 trillion euros of total assets as of Jan. 31, according to data compiled by Morningstar.
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