The State Investment Board (SIB) today voted to divest of investments in Russian entities or securities issued by Russian entities, as board members learned that Russian investment exposure already has been reduced by more than one-third since Monday.
Lt. Gov. Brent Sanford, who chairs the SIB, called today’s special meeting to discuss Legacy Fund and other state investments in Russia in light of the country’s continuing attacks on Ukraine.
As of Monday, North Dakota had a total of $15.9 million in investments with Russian exposure across the state’s Legacy Fund, pension fund and insurance pool overseen by the SIB, according to the state Retirement and Investment Office (RIO). Board members were informed today that Russian exposure has already been reduced by $5.9 million, or 37 percent, to $10 million, as investment managers have exited investment positions and the value of investments with Russian exposure has dropped.
“It has been phenomenal speed to identify and reduce to the level that it has to this point. And I hope that people are seeing that the answer is here – no more new investments in Russia and an absolute plan for exiting the investments with Russian connection,” Sanford said during the meeting. “It’s definitely being expedited.”
“We are all appalled at the humanitarian disaster that is happening for this needless war,” RIO Chief Investment Officer Scott Anderson said. “This situation is very fluid as managers are exiting positions, as prices are changing, and as brokers-traders are halting transaction activity.”
Of the $10 million in Russian investments, $7.8 million is in commingled funds that have multiple investors, and the SIB doesn’t have authority to divest from individual securities within those commingled funds. For the SIB to divest immediately from the Russian investments, it would have to divest its entire investment in the commingled funds – a total of $950 million.
“Everybody is on board with divesting from Russian investments. It’s just sometimes it’s not as easy as clicking the sell button,” said SIB member Troy Seibel, chief deputy attorney general. “This is going to take time and it’s going to take a lot of effort from staff, but the public needs to know that RIO staff and our managers are doing everything they can to unwind these positions as quickly as possible.”
“Regarding removing the (Russian) exposures, the investors are following the sanctions diligently, and they are in some sense restricted in what they can sell because of the illiquid market,” Anderson said. “But I know they are making political risk decisions regarding this event, they’re following the sanctions diligently, they’ve heard loud and clear from us our concerns regarding the risk of these securities. So, my estimation is that the managers will follow an orderly wind-down of these securities.”
Anderson noted that the SIB has less exposure to Russian entities than many other investment plans in other states.
“I just want to applaud our staff, just at the onset, our exposure – even in the emerging market piece – is lower than most of the consumer products that are out there,” SIB member and State Treasurer Thomas Beadle said.
After an executive session, the SIB voted unanimously to pursue the divestment strategy, which RIO staff will report on at the SIB’s next regularly scheduled meeting on March 25.
“We appreciate the board’s guidance and have received negotiating strategy that we will then need to communicate with our investment managers, and this will need to be done prior to a public discussion of the nuances of that negotiating strategy so as to not hinder, hamper or impair our investment managers from negotiating on our behalf and implementing that strategy,” RIO Executive Director Jan Murtha said.
Separately from SIB, the North Dakota Board of University and School Lands (Land Board) also had approximately $28.8 million invested in Russia-based companies as of Monday, which is equal to less than half of 1% of the board’s total investment assets of more than $6 billion. The Department of Trust Lands and its investment consultant are reviewing the investments and developing a strategy for the Land Board to consider on how to address the investments.