BlackRock begins winding down Russia ETF

Aug 16th, 2022 | By | Category: ETF and Index News

BlackRock has announced that it will begin liquidating the iShares MSCI Russia ETF (ERUS US), making the fund the first US-listed ETF to become an official casualty of the war in Ukraine.

BlackRock begins winding down Russia ETF

Russian securities have been subject to sanctions and other capital controls since the onset of the war in Ukraine.

ERUS, which has been listed since November 2010, was designed to provide broad Russian equities exposure by directly replicating the MSCI Russia Index, a ten-stock benchmark covering the country’s large and mid-cap segments.

The fund reached its peak assets under management of around $820 million in February 2018. In the week preceding the start of the war in February 2022, it housed approximately $540m.

Russia’s invasion of Ukraine prompted a range of sanctions and other capital controls preventing non-Russian investors from buying and selling Russian securities. ERUS, in particular, mainly invested in Russian ordinary shares which Moscow has prevented foreigners from selling, as well as depository receipts which are currently suspended on US and UK exchanges.

Investors caught in Russia-linked ETFs have effectively been left in limbo waiting for restrictions to be lifted. The expectation that the war will be a protracted conflict, however, has led many asset managers in Europe to already begin terminating their Russia ETFs including BlackRock which is shuttering two related ETFs on the continent.

ERUS, however, is the first Russia ETF in the US to officially be liquidated. Beginning on 17 August, BlackRock will begin selling off the fund’s liquid assets and distributing any proceeds to investors. The ETF’s liquid assets are relatively insignificant, however, comprising just a cash reserve and minor money market holdings.

As ERUS’s holdings of Russian equities are still unsellable, BlackRock will draw out the liquidation process until at least the end of 2023 in the hope that conditions in Russian securities markets improve. If conditions do not improve, however, BlackRock may decide to terminate the fund in 2024 regardless of whether investors have received any proceeds related to the selling of these Russian securities.

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