Super funds drop Russian assets

Australian superannuation funds are dropping Russian assets in response to its invasion of Ukraine amid escalating global sanctions against Russia.

Yesterday Treasurer Josh Frydenberg and Senator Jane Hume released a joint statement requesting that super funds review their Russian investments.

"The Morrison government is today confirming its strong expectation that Australian superannuation funds will review their investment portfolios and take steps to divest any holdings in Russian assets," Frydenberg and Hume said.

"The government welcomes the voluntary actions taken to date by some superannuation funds to divest their Russian assets... it is important that Australia sends a clear and unequivocal signal that we condemn in the strongest possible terms Russia's unprovoked and unjustified attack on Ukraine."

Divestment from super funds could compliment the range of sanctions imposed on Russia by the Australian government, in alignment with international sanctions.

The first fund to formally respond yesterday was the newly formed Australian Retirement Trust (the merged QSuper and Sunsuper), which confirmed it would divest Russian holdings.

"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," chief investment officer Ian Patrick said.

"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."

He added that the fund cannot rule out having some minimal exposures, despite its best endeavours.

However, Russian shares accounted for less than 0.2% of Australian Retirement Trust Super Savings' account assets, debt exposure was even smaller, at less than 0.1%.

The fund has just a $6 million exposure to Ukrainian debt, less than 0.1% of the total assets of the $230 billion fund.

Australian Retirement Trust's QSuper account assets has no exposure to shares or bonds in either Russia or Ukraine, and that remains the case, the fund said.

Meanwhile, AustralianSuper has said it has been steadily reducing its exposure to Russian investments since June 2021. At that time they accounted for 0.22% of total assets and now they make up just 0.07%.

"We will continue winding down the remaining exposure to divest our holdings in Russia as markets permit," the fund said.

Hostplus has also committed to fully divesting, adding that its exposures were also decreased in the lead up to the conflict.

Hostplus said just $10 million of its total $76 billion portfolio is invested in Russia.

"We continue to work with our existing managers across our investment portfolios to achieve this outcome acknowledging that our ability is somewhat hampered by the Russian Central Bank ordering market brokers to reject foreign clients trying to sell Russian securities," Hostplus said.

A spokesperson for Cbus said that since 2018 the fund had been taking additional action to limit exposure to Russian securities, separate to the current sanctions.

"As such, 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 (around 0.10% 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," the spokesperson said.

"We continue to seek to exit positions where possible and have reduced some positions over the last week where trading is possible."

The Financial Services Council (FSC) said it will develop guidelines for super trustees and fund managers to implement all sanctions imposed on Russia, eliminate new investments in Russia and review portfolios with a view to winding down Russian investments.

Editor's note: This story was updated at 2.30pm to reflect the statements from AustralianSuper, Hostplus and Cbus.