T. Rowe values Russian securities “effectively at zero”
Russia’s war in Ukraine has made the premiere’s stock market “largely uninvestable” and severely devalued a substantial portion of the $20 million T. Rowe Price Emerging Europe fund, the company said on Monday. to shareholders.
In a filing with the Securities and Exchange Commission, T. Rowe removed Russia from a list of countries in which the actively managed fund had emphasized “core” activity, alongside the Czech Republic, from Greece, Hungary, Poland, Romania and Turkey.
The fund, which is solely managed by Ulle Adamson, can also invest in Bulgaria, Croatia, Estonia, Georgia, Kazakhstan, Latvia, Lithuania, Slovakia, Slovenia and Ukraine, according to its latest prospectus.
T. Rowe cited the “significant” package of US sanctions against Russia, as well as the Russian Central Bank’s suspension of foreign stock sales and a general paralysis of Russian securities trading since the war broke out. end of February, while the engines of the deletion.
“Due to the market events described above, Russian securities that continue to be held in the fund’s portfolio and cannot be sold may be effectively valued at zero,” T. Rowe Price said in the filing. . “Market events are changing rapidly and there may be additional impacts on investments in the fund.”
Russian stocks made up about 43% of the fund on Feb. 28, the most recent day for which country-level data is available, according to the T. Rowe Price website. Five of its top 10 holdings that day were Russian, including energy giants Lukoil and Gazprom, which accounted for more than a sixth of the combined fund.
Although substantial, this is less than the 67% exposure to Russia in the MSCI Emerging Markets Europe index that the fund uses as a benchmark. Both MSCI and FTSE Russell announced last week that they would remove Russian stocks from all indices.
A review of past holding data indicates that Russian equities made up about 65.6% of the fund at the end of 2021, including a handful of reserves in the form of Russian rubles.
However, the war started by Russian Vladimir Putin has caused this fund (along with several ETFs exposed to Russia) to fall by more than 85% in the last month. The fund held $183 million in October, but its value has since fallen, despite slightly positive net flows in recent months.
The delisting comes days after BlackRock zeroed its own holdings of Russian stocks; The company’s iShares MSCI Russia ETF fell 94% in a matter of days, noted Ben Johnson, director of global ETF research at Morningstar.
Johnson said he expected more asset managers to follow the example of BlackRock and Amundi, the big European asset manager, which also marked its Russian stock holdings at zero.
“This helps them manage their index portfolios as it will address potential tracking error issues once the securities are removed from these funds’ benchmarks,” Johnson wrote in a post last week. “It can also help them comply with rules regarding the portion of their portfolios invested in illiquid assets. Viewing these assets as worthless can keep them in compliance.