Super funds move to offload Russian investments

Retirement savers have been in the dark on how their hard-earned super was being invested. But new rules shine a light on where the money is going.

Australian super funds had many millions of dollars invested in Russian companies at the end of 2021. Picture: Bloomberg

For years retirement savers have been in the dark on how their hard-earned superannuation was being invested. But new rules that came into play last week shine a light on where the money is going.

It also reveals what interests our largest superannuation funds had in Russia – before Vladimir Putin invaded Ukraine.

The data, released at the end of March, is current to December 31. That’s before the government said there was a “strong expectation” that local funds would divest their Russian assets.

As of December 31, the nation’s biggest super fund, the $260bn AustralianSuper, had more than $120m invested in Russia’s largest lender, the majority state-owned financial services provider Sberbank. The value of that investment plunged more than 50 per cent by February 25, when Moscow halted all trade on the index.

On its secondary listing in the UK, Sberbank shares collapsed 95 per cent by early March to be worth just US1c (1.3c).

Other Russian investments in AustralianSuper’s balanced option at the time – which had an overall value of $176.5bn at the end of last year – included $52m in oil play Lukoil, $45m in energy operator Gazprom and $37m in state-owned oil company Rosneft.

All up, AustralianSuper appears to have had more than $336m invested in Russian companies just weeks before Moscow invaded Ukraine. All of these companies took big hits in February, signalling major losses for investors still holding on.

On March 4, after Josh Frydenberg said he expected the nation’s super funds to divest their Russian investments, AustralianSuper said it had been “actively managing” its exposure to Russian assets “to address changing and emerging risks”. “Since June 2021 we have reduced the fund’s exposure to Russian investments by nearly two-thirds, from 0.22 per cent to around 0.07 per cent of total assets. We will continue winding down the remaining exposure to divest our holdings in Russia as markets permit,” it said.

As at December 31, Russian holdings accounted for 0.19 per cent of the fund’s balanced option, where the majority – two thirds – of its total assets sit.

Like AustralianSuper, the nation’s second largest super fund, the $230bn Australian Retirement Trust – created through the recent merger of Sunsuper and QSuper – also had significant Russian investments at the end of 2021. All of these were held by Sunsuper; sources said QSuper had no Russian holdings at all.

In its balanced option, where $47bn sat at December 31 – more than half of Sunsuper’s overall assets under management – the fund had investments in more than 30 Russian companies worth some $56m. Its portfolio holdings also included Sberbank, Gazprom, Lukoil and Norilsk Nickel.

Australian Retirement Trust chief investment officer Ian Patrick in early March said the fund’s exposure to Russia was “very limited” before the conflict.

It had less than 0.2 per cent of members’ funds invested in Russian stocks and less than 0.1 per cent in Russian bonds, he said.

Cbus, the industry fund for the construction industry, held about $124m in Russian investments in its balanced option at December 31. These holdings included $34m in Lukoil, $11m in the Moscow exchange, $20m in Norilsk Nickel and $7.8m in oil major Tatneft. These holdings were a mix of direct shares and American Depository Receipts, which are certificates that represent holdings in non-US companies.

Like others, Cbus is understood to have reduced its holdings as tensions between Russia and Ukraine escalated. By the time Moscow invaded in late February, Russian holdings in the super fund sat at about 0.10 per cent of total assets under management.

At Hostplus, the $70bn industry fund for the hospitality and tourism sectors, Russian investments in its balanced option included Sberbank, the Moscow Exchange, vodka maker Beluga and gold miner Polyus.

All up, the fund appears to have held about $57m in Russian investments at the end of 2021, through both direct shares and American Depository Receipts.