HSBC Russia ETF closure leaves only one in Europe

The decision by HSBC Asset Management to close its Russia equity exchange traded fund means there is only one such product open in Europe.

FinEx Capital Management told Ignites Europe it did not plan to close its Russian RTS Equity ETF, which has been suspended since March last year following Russia’s invasion of Ukraine.

The fund was one of eight Russia equity ETFs in Europe before Russia’s invasion of Ukraine, which had combined assets under management of €820mn at the end of January 2022, according to Morningstar data.

But the FinEx ETF, which had €72mn in assets under management in January last year, is soon to be the only one of those funds remaining, after HSBC AM announced that it would close its Russia Capped ETF on March 24.

HSBC AM said in a shareholder notice: “The directors have determined that it is no longer practical nor advisable for the fund to continue to exist.”

An HSBC AM spokesperson added: “[The fund] has remained suspended since March last year and we have constantly reviewed the situation in the best interests of our shareholders.”

HSBC AM’s decision came ahead of the discontinuation of its fund’s underlying index on March 1 by MSCI, which is set to abandon all indices containing only Russian securities on that date due to “extended lack of accessibility in the Russian equity market”.

The notice cites MSCI’s decision as one of the reasons for closing the fund, as well as the ongoing invasion of Ukraine and the inability to dispose of or value the fund’s investments.

It adds that the directors have determined it is now appropriate to redeem all of the fund’s shares, but that it is “not expected” that there will be any distribution to shareholders on the closure date because Russian securities currently cannot be sold.

“In the event that it is possible to sell and realise any value from the fund’s investments at a future date, the proceeds arising from the sale shall be paid to shareholders on a pro-rata basis in accordance with each shareholder’s relevant holding in the fund,” HSBC AM said.

DWS, BlackRock, Invesco and Amundi have all also announced closures of MSCI Russia ETFs.

FinEx’s ETF was one of two European ETFs that followed the RTS Index, which is operated by the Moscow Exchange.

ITI Funds managed the other RTS Index ETF but announced its closure in August last year.

Pictet Asset Management manages the largest active fund invested in Russian securities, which it suspended in the days following the invasion.

Pictet AM did not respond to a request for comment on the firm’s plans for the fund.

Amin Rajan, chief executive officer of Create-Research, an asset management consultancy, said he thought active funds would liquidate too.

“The sanctions from the west have caused a lot of damage to Russia’s fundamentals,” he said.

“Russia’s fundamentals are unlikely to get better for a long while.”

*Ignites Europe is a news service published by FT Specialist for professionals working in the asset management industry. Trials and subscriptions are available at igniteseurope.com.