Sanctions could force index funds to alter investments if Russian company shares are off limits
S&P Dow Jones is seeking advice from investors as it prepares to possibly drop some Russian stocks from its indexes due to US and western European sanctions against Russia, the company says in a note to clients.
Many index funds may be obliged to drop Russian holdings from their portfolios due to European and US sanctions that affect access to western capital markets by Russian companies. The US Treasury and the European Union have announced a series of measures, though the impact on Russian stocks traded abroad are not yet clear.
The sanctions have been outlined in a series of announcements by US and European officials since the conflict between the West and Russia heightened over Ukraine, and were recently tightened over suspicions that Russia supplied pro-Russia rebels in Ukraine with the technology that shot down a Malaysian passenger airplane last month.
‘While S&P Dow Jones Indices believes its indices are not directly impacted by these actions, we do recognize that some licensees may be required to divest holdings of sanctioned companies,’ the firm says in a note.
It lists 88 indices that include Russian stocks, including the Dow Jones Global Total Stock Market Index, the Dow Jones Global Index, the S&P BRIC 40 Index, the S&P Global Oil Index, the Dow Jones Emerging Markets Index, the Global Dow and others. Included are 11 indices that have only Russian stocks, such as the Dow Jones Russia Index and the S&P BMI Russia.
The note includes a list of six questions for clients, including whether they feel sanctioned companies should be removed from the all-Russian stock indices and whether a stock affected by a US sanctions list should also be treated as if it were on European lists, and vice versa.
‘Where you have funds tracking these indices or benchmarking to the indices, would you be disadvantaged if all sanctioned securities were not removed? If so, how?’ S&P Dow Jones Indices asks in the note.
The company has given clients until August 15 to answer the questions.