US asset manager BlackRock has been hit by a $17 billion loss on its Russian securities holdings due to the military offensive in Ukraine, The Financial Times has reported.
Clients held more than $18.2bn in Russian assets at the end of January. Global sanctions and battered markets have made the “vast majority unsaleable, leading BlackRock to mark them down sharply”, FT reported.
On February 28, the world’s largest asset manager suspended the purchase of all Russian securities in its active and index funds. At that time, its holdings related to the country had fallen to less than 0.01 per cent of assets under management.
The total value was about $1bn on February 28, when markets were effectively frozen, and the change was because of markdowns rather than asset sales, FT quoted a BlackRock representative as saying.
The company has proactively advocated with its index providers to remove Russian securities from broad-based indices, the company’s chief executive and chairman Larry Fink said in a LinkedIn post last week.
The swift and co-ordinated response by governments, international institutions, regulators, global businesses and investors has inhibited Russia’s ability to participate in and benefit from the global financial system, Mr Fink said.
“This has been a highly complex and fluid situation and BlackRock will continue actively consulting with regulators, index providers and other market participants to help ensure our clients can exit their positions in Russian securities, whenever and wherever regulatory and market conditions allow.”
BlackRock manages about $10 trillion in assets globally. Its client base includes institutional investors, banks, sovereign wealth funds, family offices and private investors.
It has marked down the value of its largest Russian exchange traded fund, ERUS, from about $600 million at the end of 2021 to less than $1m, FT reported.
It has also suspended trading and waived the management fees on all of its Russian ETFs as well as an emerging Europe fund that was exposed to Russia. That fund had a net asset value of $683.6m at the end of January, but has been marked down to $295.6m.
“If tension and sanctions ease, Russian securities could start trading more freely again and recover some of their value. In that scenario, BlackRock’s funds and clients could benefit as prices recover,” the FT report said.
US banks Goldman Sachs and JPMorgan said on Thursday they will pull their businesses out of Russia, acting in compliance with government instructions, they said.
