MOSERS board votes to divest pension fund of Russia-linked investments

Falling values, sanctions have already made the small stake in global funds virtually worthless, board told

By: - March 3, 2022 6:02 pm

MOSERS staff and board members (from left foreground) Ken Zellers, Scott Fitzpatrick, Executive Director Ronda Stegmann, Crystal Wessing and John Wiemann listen during a presentation Thursday on the retirement system’s Russia-linked assets. (Rudi Keller/Missouri Independent)

The Missouri State Employees Retirement System will dump investments tied to Russia and bar investment managers from making future purchases of Russian securities, the Board of Trustees decided Thursday.

The board held a special meeting in response to the call from state Treasurer Scott Fitzpatrick to divest. After a brief discussion, including a presentation from chief investment officer T.J. Carlson that showed the current Russian assets are essentially worthless, the board unanimously approved a motion from Fitzpatrick to end all involvement with Russian assets.

“We are doing the right thing and it seems like a lot of this is going to happen organically in the markets,” Fitzpatrick said after the vote.

The retirement system, known as MOSERS, has no direct ownership of Russian securities but does have a small portion of its $13.4 billion portfolio in funds that own assets in markets worldwide. That investment, worth $18.6 million on Dec. 31, had lost 90% of its value by Wednesday, to about $1.6 million, Carlson told the board.

On Wednesday, the manager of the funds, Morgan Stanley Capital Investments, announced it would reclassify the Russian investments to a standalone market instead of an emerging market fund, “at a price that is effectively zero and as of the close of March 9, 2022.”

That means the Russian asset portion of MOSERS’ original investment in those funds is worthless, Carlson said.

Since Russia invaded Ukraine on Feb. 24, several states have taken steps to eliminate their Russia-linked holdings. President Joe Biden has imposed severe sanctions on Russia, as have many other countries.

In a presentation to the board, Carlson said the MOSERS portfolio has also been reviewed for investments tied to the sanctioned companies and individuals.

“We don’t have any exposure to any sanctioned companies,” Carlson said.

The three largest funds managed by the state aside from MOSERS are the Local Government Employees Retirement System, or LAGERS, the Public School and Education Employee Retirement System, or PSRS/PEERS, and the Missouri Department of Transportation and Highway Patrol Employees’ Retirement System, or MPERS.

The PSRS/PEERS Board of Trustees has set a meeting for Friday morning to discuss its investments tied to Russia. The PSRS/PEERS fund is the state’s largest with $57.9 billion in assets and a total exposure of approximately $138.9 million in Russian securities, Susan Wood, director of communications, wrote in an email Tuesday.

LAGERS has $8.3 million in Russian securities in its $10.3 billion asset portfolio, Elizabeth Althoff, legislative and communications coordinator wrote in an email Tuesday. The next LAGERS board meeting is scheduled for March 25.

The resolution passed by the MOSERS board bars any future direct investment in Russian companies or government securities and states the system will not work with any fund manager investing in funds that make those kind of investments. 

The war has in many ways made it unlikely that anyone outside of Russia can trade in Russian stocks or bonds.

Over the past two days, Russia has made it harder to sell assets held by foreigners and banned payments of dividends and interest to foreign stock and bond holders, Reuters reported. The Russian agency overseeing the sale of securities said it was limiting payment options on Russian securities for foreign individuals and companies, as well as a right to transfer such assets.

The Missouri House voted 143-0 in favor of a resolution Thursday to “condemn in the strongest possible terms, Vladimir Putin’s violent attack on the people of Ukraine and strongly endorse the swift and severe economic sanctions and stringent export controls that President Biden’s administration has imposed on Russia.”

The decision by the MOSERS board is in the spirit of that resolution, said Speaker Pro Tem John Wiemann, one of the legislators on the 11-member board.

“It is entirely consistent with the way the entire state’s thoughts are on how we should handle our dealings with Russia,” Wiemann said. 

It is unlikely that anything that happens in Missouri will have an impact on Russia’s actions, Gov. Mike Parson said during remarks to reporters and editors in the governor’s mansion for Missouri Press Association Day. He said he “totally supports” Ukraine and its people and said international sanctions should be strengthened.

“If we were asked tomorrow to do something,” Parson said, “I would respond to that ask, whatever it might be.”

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Rudi Keller
Rudi Keller

Rudi Keller covers the state budget and the legislature. A graduate of the University of Missouri School of Journalism, he spent 22 of his 32 years in journalism covering Missouri government and politics for the Columbia Daily Tribune, where he won awards for spot news and investigative reporting.