U.S. Pensions Face Demands to Exit Hard-to-Unwind Russia Assets

U.S. politicians from New York to California are calling for public pensions to shed hundreds of millions of dollars in investments tied to Russia. So far, the retirement funds aren’t moving quickly to divest. In many cases, they can’t.

The funds have relatively small exposure, but unwinding such assets is complex and could mean losses as they are trading at deep discounts and liquidity is scarce. Many of the largest retirement systems, which invest billions for teachers and other public servants, are adopting a patient approach.

“Considering that Russia amounts to about 2% of the global economy, whether a pension fund or other institutional investor would want to get out of an entire index fund in order to divest Russia holdings would be a questionable approach,” said Keith Brainard, research director of the National Association of State Retirement Administrators.

The California Public Employees’ Retirement System, the largest U.S. public pension, “supports the people of Ukraine who are suffering,” Chief Executive Officer Marcie Frost said in an statement.

But less than 1% of its $473.6 billion portfolio is in Russian-linked assets. It includes mostly stocks or index funds, as well as real-estate investments and private equity, worth in total about $900 million to $1.1 billion. The system isn’t taking precipitous action. Instead, it’s merely “monitoring current events and will take action as appropriate to protect the interests of our members,” Frost said.