More than a dozen funds managing at least $US2.5 billion have been frozen as the fallout from Russia’s invasion of Ukraine reverberates through financial markets.

Swiss asset management firm Pictet Asset Management was among the latest batch of firms to write to investors telling them they had suspended activities or restricted investors from accessing their money from funds investing in Russian securities. Its $US637 million Russian equities money pool is down 42 per cent this year through Friday.

The moves followed heavy losses in financial markets and many of the funds that were frozen have suffered losses of more than 30 per cent this year. They’ve been hit by a new wave of sanctions designed to isolate Russia with measures including preventing the central bank from accessing its foreign reserves and locking some Russian banks out of the SWIFT system that helps trillions of dollars worth of transactions.

Index providers are assessing the country’s accessibility with MSCI Inc. seeking feedback on whether to remove Russia from its stock indexes. Intercontinental Exchange said it will remove debt issued by sanctioned Russian entities from its fixed-income indexes at a rebalancing exercise on March 31. JPMorgan Chase is planning to exclude Russian debt from two ESG versions of its sovereign bond indexes.

Those changes have the power to impact asset mangers more broadly. Many exchanged-traded funds and passive tracker funds follow indexes and have to make changes to their holdings when the index provider changes the composition of benchmarks.

Overseas investors owned about $US86 billion of Russian equities at the end of last year, according to data from the Moscow Exchange. Most are now unable to liquidate or properly trade their holdings after Moscow banned brokers from selling securities held by these funds. Almost $US13 billion of Russian stocks owned by U.S.- and Europe-based funds is now in sanctioned companies, Bloomberg Intelligence estimates.

The decision to gate funds is usually considered a last resort and underscores the difficulties investors are facing navigating an unprecedented wave of economic sanctions on Russia following its invasion of Ukraine.

Stopping investors from accessing their money from daily dealing funds is rare, even in the wake of broad macro events.

US-based Reserve Management delayed redemptions from a cash pool during the financial crisis. Credit Suisse and Nomura liquidated investment products that made bets against market volatility in February 2018. Several UK property funds stopped client withdrawals after the Brexit vote in 2016, and again during the pandemic in 2020.

The effects of the sanctions are already rippling through boardrooms across the world and many corporate executives have concluded that the benefits of ties with Russian firms aren’t worth the reputational and financial risks.