After Russia invaded Ukraine last year, Minnesota lawmakers moved swiftly to divest state pension funds and other assets tied to Russia and Belarus.
Officials on Minnesota’s State Board of Investment now say the state’s holdings were worth far less than previously estimated. And while the SBI has sold off most of those assets, it’s had trouble fully divesting.
The SBI estimates that before the Russian invasion, in December of 2021, its funds with ties to Russia and Belarus were worth $240 million. Those assets included stocks, bonds and foreign currency. That was about 0.25% of combined funds at the time, a modest amount in the scope of the SBI’s work, which oversees more than $123 billion in assets, mostly money connected to pension and retirement funds for public workers.
The value of SBI’s estimated holdings dropped leading up to the invasion, but fund managers also sold a significant chunk of assets as the crisis began to build. But the value of remaining holdings dropped even further after the invasion. Legislators who supported the bill had initially expected the state’s relevant holdings to be worth $53 million. The value quickly plummeted in part because sanctions and lack of interest in Russian companies had caused their value to nosedive.
By early April, when the bipartisan law went into effect, the SBI estimated that its relevant Russian and Belarusian securities had a market value of only $3.6 million. The law did not target U.S. or Minnesota companies that simply do business or have ties with Russia.
Late last month, the SBI released a statement from Jill Schurtz, the executive director and chief investment officer, about its divestment efforts. Between April of 2022 and the end of the year, its liquidation manager sold some or all of 26 securities from its “divestment list.” But, at that point, 27 holdings remained on the divestment list, at an estimated value of $1.1 million.
Schurtz wrote the board “has divested nearly 70% of the market value of affected Russian and Belarusian securities.”
Why do they have remaining assets? The SBI says its ability to sell the securities is “severely limited” because of trading restrictions that stem from economic sanctions.
“In particular, the market for Russian locally-listed equity securities remains effectively closed to U.S. investors,” Schurtz wrote. “Russian sanctions aimed at restricting foreign capital flows remain in place, and more recently, the market for most Russian government bonds has become restricted to U.S. investors.”