Do Russian stock holders in the west have any chance of recovery?

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speer
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Do Russian stock holders in the west have any chance of recovery?

Post by speer »

No politics please.

I (American) own ERUS ishares that stopped trading in 2022 when the conflict started. I have no problem holding the assets for ever or even let a Russian fiduciary hold it for me in "frozen" status until things settle down. Im sure in in 10+ years things will settle down and trading commence again.

What I do not want however (which is currently happening) is Blackrock force liquidating, especially now where it cannot be traded, its essentially an almost 100% loss. So if had $100,000 invested your liquidation will be like $50. I would be okay with Blackrock dissolving but if they offered for example each holder gets a non-tradable right to their share of the proceeds that expires in the year 2099 or whenever the last share is sold - or some other options to redeem the proceeds in a Russian brokerage.

Anyone aware of any options?
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Re: Do Russian stock holders in the west have any chance of recovery?

Post by Valuethinker »

speer wrote: Sun Mar 24, 2024 1:01 pm No politics please.

I (American) own ERUS ishares that stopped trading in 2022 when the conflict started. I have no problem holding the assets for ever or even let a Russian fiduciary hold it for me in "frozen" status until things settle down. Im sure in in 10+ years things will settle down and trading commence again.

What I do not want however (which is currently happening) is Blackrock force liquidating, especially now where it cannot be traded, its essentially an almost 100% loss. So if had $100,000 invested your liquidation will be like $50. I would be okay with Blackrock dissolving but if they offered for example each holder gets a non-tradable right to their share of the proceeds that expires in the year 2099 or whenever the last share is sold - or some other options to redeem the proceeds in a Russian brokerage.

Anyone aware of any options?
Remembering that there were American holders of Imperial Russian bonds issued before the Revolution in 1917 ...

There's been discussion here about Yandex shares and what is going on there. So that may give you a steer if you search the thread.
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Re: Do Russian stock holders in the west have any chance of recovery?

Post by toddthebod »

speer wrote: Sun Mar 24, 2024 1:01 pm No politics please.

I (American) own ERUS ishares that stopped trading in 2022 when the conflict started. I have no problem holding the assets for ever or even let a Russian fiduciary hold it for me in "frozen" status until things settle down. Im sure in in 10+ years things will settle down and trading commence again.

What I do not want however (which is currently happening) is Blackrock force liquidating, especially now where it cannot be traded, its essentially an almost 100% loss. So if had $100,000 invested your liquidation will be like $50. I would be okay with Blackrock dissolving but if they offered for example each holder gets a non-tradable right to their share of the proceeds that expires in the year 2099 or whenever the last share is sold - or some other options to redeem the proceeds in a Russian brokerage.

Anyone aware of any options?
Sounds like that ship has sailed.
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Re: Do Russian stock holders in the west have any chance of recovery?

Post by nisiprius »

It seems to me that it doesn't matter whether Russian stockholders in the west have any chance of recovery. The question is whether ERUS's shareholders have a chance of recovery.

I don't see wiggle room in their statement:
As previously announced, the iShares MSCI Russia ETF is in the process of liquidation. An initial liquidation distribution was sent to shareholders on Aug 17, 2022 and a subsequent liquidation distribution was sent to shareholders on December 27, 2023. On December 14, 2023, the Board of Directors of iShares, Inc. unanimously voted to continue to have ERUS managed pursuant to the plan of liquidation through December 31, 2024 (absent significant market developments). BlackRock Fund Advisors (BFA) has implemented a waiver of the Fund's management fee, which will continue in effect while the Fund liquidates. For more information, please refer to the prospectus and/or click here for further details.
This is just a case of manager risk. You don't like iShares' managers' choice. That sometimes happens when you choose to have third parties manage your portfolio for you.
Last edited by nisiprius on Sun Mar 24, 2024 3:30 pm, edited 2 times in total.
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Re: Do Russian stock holders in the west have any chance of recovery?

Post by nedsaid »

This shows the risk of investing in Emerging Markets, stuff like this has diminished my enthusiasm for them.
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Re: Do Russian stock holders in the west have any chance of recovery?

Post by Call_Me_Op »

nedsaid wrote: Sun Mar 24, 2024 1:48 pm This shows the risk of investing in Emerging Markets, stuff like this has diminished my enthusiasm for them.
There's a difference between investing in a single issuer versus a diversified EM bond fund. Stocks can go to zero too - basically the same issue.
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Re: Do Russian stock holders in the west have any chance of recovery?

Post by nedsaid »

Call_Me_Op wrote: Sun Mar 24, 2024 2:44 pm
nedsaid wrote: Sun Mar 24, 2024 1:48 pm This shows the risk of investing in Emerging Markets, stuff like this has diminished my enthusiasm for them.
There's a difference between investing in a single issuer versus a diversified EM bond fund. Stocks can go to zero too - basically the same issue.
I have two Emerging Market mutual funds, one active and the larger one is passive. I am still invested but with less enthusiasm.
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Re: Do Russian stock holders in the west have any chance of recovery?

Post by Call_Me_Op »

nedsaid wrote: Sun Mar 24, 2024 2:49 pm
Call_Me_Op wrote: Sun Mar 24, 2024 2:44 pm
nedsaid wrote: Sun Mar 24, 2024 1:48 pm This shows the risk of investing in Emerging Markets, stuff like this has diminished my enthusiasm for them.
There's a difference between investing in a single issuer versus a diversified EM bond fund. Stocks can go to zero too - basically the same issue.
I have two Emerging Market mutual funds, one active and the larger one is passive. I am still invested but with less enthusiasm.
I would not abandon a strategy based upon one investment going south. That is why diversification is so important. It does make one wonder about holding all of one's bonds in any one country's issues (including the US).
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Re: Do Russian stock holders in the west have any chance of recovery?

Post by jory1804 »

This thread makes me wonder what other funds holding Russian assets have done, such as emerging markets funds and total world funds.

What has generally been the treatment by these other funds? Is it different from what's happening with ERUS?
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Re: Do Russian stock holders in the west have any chance of recovery?

Post by nedsaid »

Call_Me_Op wrote: Sun Mar 24, 2024 2:55 pm
nedsaid wrote: Sun Mar 24, 2024 2:49 pm
Call_Me_Op wrote: Sun Mar 24, 2024 2:44 pm
nedsaid wrote: Sun Mar 24, 2024 1:48 pm This shows the risk of investing in Emerging Markets, stuff like this has diminished my enthusiasm for them.
There's a difference between investing in a single issuer versus a diversified EM bond fund. Stocks can go to zero too - basically the same issue.
I have two Emerging Market mutual funds, one active and the larger one is passive. I am still invested but with less enthusiasm.
I would not abandon a strategy based upon one investment going south. That is why diversification is so important. It does make one wonder about holding all of one's bonds in any one country's issues (including the US).
I am an advocate for a Global portfolio. I figure that roughly 20% of my retirement portfolio is in International stocks and bonds. I own the Fidelity Emerging Markets Index and the Templeton Developing Markets fund as my Emerging Markets investments. I should probably increase my International allocation but it seems that whenever I do that, the US Market zooms and I am back to my old allocation. Sort of ran up the white flag and decided to let the portfolio allocations float.
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Re: Do Russian stock holders in the west have any chance of recovery?

Post by nisiprius »

jory1804 wrote: Sun Mar 24, 2024 3:23 pm This thread makes me wonder what other funds holding Russian assets have done, such as emerging markets funds and total world funds.

What has generally been the treatment by these other funds? Is it different from what's happening with ERUS?
Interesting question.

March 3rd, 2022: Vanguard will not restrict is active managers' decisions on Russia
Top mutual fund manager Vanguard Group said on Friday it will adhere to international sanctions being imposed on Russia in the wake of Moscow's invasion of Ukraine, but will not restrict the investment decisions of managers of its actively-managed funds.

In a note on its website on Friday addressing investments in Russia, Vanguard Chief Investment Officer Greg Davis said that managers of its actively-managed funds "will decide how best to navigate liquidity challenges and balance investment risks with potential rewards.”
That link to Davis' note is currently giving a 404 error.

Hmmm.... VWO, the Vanguard FTSE Emerging Markets Index Fund, is currently showing a holding of 147,246,629 shares of Gazprom with a market value of $16.09.

Source

Image

I just exported the full holdings for VWO, sorted on "country" and deleted everything that wasn't RU.

It appears that VWO is holding 47 Russian stocks, with a total market value of $9,682.38, out of $98,871,395,294.98 for the fund. But they haven't been liquidated, although SECURITYDEPOSITORY = "---" for all of them.

So I guess they are being held in unsure and uncertain hope of a inglorious resurrection.

Code: Select all

TICKER	MARKET VALUE*	HOLDINGS
VTBR	$7,485.05 	VTB Bank PJSC
TGKA	$1,138.21 	TGC-1 PJSC
FEES	$610.49 	Federal Grid Co - Rosseti PJSC
HYDR	$173.75 	RusHydro PJSC
IRAO	$55.11 	Inter RAO UES PJSC
MRKP	$34.24 	IDGC of Centre and Volga Region PJSC
OGKB	$33.10 	OGK-2 PJSC
UPRO	$20.19 	Unipro PJSC
CBOM	$19.73 	Credit Bank of Moscow PJSC
GAZP	$16.09 	Gazprom PJSC
SBER	$15.70 	Sberbank of Russia PJSC
ELFV	$13.80 	EL5-ENERO PJSC
MSNG	$13.19 	Mosenergo PJSC
SNGSP	$12.68 	SURGUTNEFTEGAS-PREFERENCE
SNGS	$6.55 	Surgutneftegas PJSC
AFKS	$4.23 	Sistema AFK PAO
RUAL	$3.94 	United Co RUSAL International PJSC
ALRS	$3.83 	Alrosa PJSC
MAGN	$3.21 	Magnitogorsk Iron & Steel Works PJSC
NMTP	$3.07 	Novorossiysk Commercial Sea Port PJSC
MOEX	$2.28 	Moscow Exchange MICEX-RTS PJSC
SGZH	$2.01 	Segezha Group PJSC
ROSN	$1.79 	Rosneft Oil Co PJSC
NVTK	$1.64 	Novatek PJSC
AFLT	$1.52 	Aeroflot PJSC
RTKM	$1.34 	Rostelecom PJSC
TATN	$1.18 	Tatneft PJSC
DSKY	$0.88 	Detsky Mir PJSC
LKOH	$0.59 	LUKOIL PJSC
NLMK	$0.51 	Novolipetsk Steel PJSC
FLOT	$0.49 	Sovcomflot PJSC
MTLR	$0.34 	Mechel PJSC
BSPB	$0.33 	Bank St Petersburg PJSC
CHMF	$0.27 	Severstal PAO
TRNFP	$0.24 	TRANSNEFT PJSC
LSNGP	$0.15 	LENENERGO-PFD
MGNT	$0.11 	Magnit PJSC
MTLRP	$0.10 	MECHEL-PREF
RASP	$0.10 	Raspadskaya OJSC
TATNP	$0.09 	TATNEFT PJSC - PREF
MVID	$0.07 	M.Video PJSC
PHOR	$0.05 	PhosAgro PJSC
GMKN	$0.05 	MMC Norilsk Nickel PJSC
LSRG	$0.04 	LSR Group PJSC
BANEP	$0.03 	BASHNEFT PAO -PREF
PLZL	$0.01 	Polyus PJSC
SMLT	$0.01 	Gruppa Kompanii Samolyot PAO
GCHE	---	Cherkizovo Group PJSC
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Re: Do Russian stock holders in the west have any chance of recovery?

Post by Exchme »

I think there is more to it than western governments not wanting you to do business in Russia. Russia doesn't want foreigners doing business in Russia and immediately put restrictions on their ability to get their money out.

Plus, many of the companies are now worthless as they are forced to work on war production at government-set prices with payoffs to government officials or the CEO will have a tragic accident falling out a window after shooting himself twice in the head. It's a lot closer to North Korea's permanent closure than to re-opening in any kind semi-free country with functioning markets. The money is long gone.
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speer
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If sanctioned stocks are "liquidated" who becomes the new owner?

Post by speer »

[Thread merged into here --admin LadyGeek]

Example, Blackrock ETF "ERUS". They (Blackrock) cant trade (buy or sell) the underlying assets (Russian stocks) because US government put sanctions on Russia who in return banned foreign clients from selling. Blackrock non the less is "liquidating" the ETF.

Does this mean Blackrock is essentially forfeiting ownership? Does Blackrock contact MOEX ( Moscow Exchange) and say: "Hey, we dont want these stocks anymore, you can keep em"? Who becomes the new owners of these shares?

From my view it looks like Blackrock would be essentially donating these shares to MOEX who can then do with it as they please, example sell the shares domestically for free money. Is this correct?
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Re: If sanctioned stocks are "liquidated" who becomes the new owner?

Post by exodusNH »

speer wrote: Sun Mar 31, 2024 1:14 am Example, Blackrock ETF "ERUS". They (Blackrock) cant trade (buy or sell) the underlying assets (Russian stocks) because US government put sanctions on Russia who in return banned foreign clients from selling. Blackrock non the less is "liquidating" the ETF.

Does this mean Blackrock is essentially forfeiting ownership? Does Blackrock contact MOEX ( Moscow Exchange) and say: "Hey, we dont want these stocks anymore, you can keep em"? Who becomes the new owners of these shares?

From my view it looks like Blackrock would be essentially donating these shares to MOEX who can then do with it as they please, example sell the shares domestically for free money. Is this correct?
Essentially, yes. You can read other stories of nationalization.

All the Russian companies became worthless to anyone not in Russia or the very small allied group.

It's one of the risks involved in investing in international stocks. The government can always change the rules or find themselves on the wrong side of sanctions.
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Re: If sanctioned stocks are "liquidated" who becomes the new owner?

Post by BitTooAggressive »

exodusNH wrote: Sun Mar 31, 2024 1:40 am
speer wrote: Sun Mar 31, 2024 1:14 am Example, Blackrock ETF "ERUS". They (Blackrock) cant trade (buy or sell) the underlying assets (Russian stocks) because US government put sanctions on Russia who in return banned foreign clients from selling. Blackrock non the less is "liquidating" the ETF.

Does this mean Blackrock is essentially forfeiting ownership? Does Blackrock contact MOEX ( Moscow Exchange) and say: "Hey, we dont want these stocks anymore, you can keep em"? Who becomes the new owners of these shares?

From my view it looks like Blackrock would be essentially donating these shares to MOEX who can then do with it as they please, example sell the shares domestically for free money. Is this correct?
Essentially, yes. You can read other stories of nationalization.

All the Russian companies became worthless to anyone not in Russia or the very small allied group.

It's one of the risks involved in investing in international stocks. The government can always change the rules or find themselves on the wrong side of sanctions.
It could happen in the United States also. This is just not an international risk.
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Re: If sanctioned stocks are "liquidated" who becomes the new owner?

Post by nisiprius »

BitTooAggressive wrote: Sun Mar 31, 2024 3:39 am
exodusNH wrote: Sun Mar 31, 2024 1:40 am It's one of the risks involved in investing in international stocks. The government can always change the rules or find themselves on the wrong side of sanctions.
It could happen in the United States also. This is just not an international risk.
In absolute terms, sure. But in sensible judgement of degree, the risk is higher in emerging markets than in developed markets. Every prospectus I've seen says so. For example, Vanguard's for VWO, the Vanguard FTSE Emerging Markets Index ETF:
Principal risks:

Emerging markets risk, which is the chance that the stocks of companies located in emerging markets will be substantially more volatile, and substantially less liquid, than the stocks of companies located in more developed foreign markets because, among other factors, emerging markets can have greater custodial and operational risks; less developed legal, tax, regulatory, financial reporting, accounting, and recordkeeping systems; and greater political, social, and economic instability than developed markets.
I try not to be a big flag-waver and I am aware of imperfections in my home country. I know that we aren't colored in with the palest tint on the corruption perceptions map. But it is absurd to suggest the risks are of comparable size in developed versus emerging markets.

Emerging markets. Take the risk or don't take it. If you take it, hope it will be rewarded, but don't pretend it isn't there. That isn't risk tolerance, that's risk denial.
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Re: If sanctioned stocks are "liquidated" who becomes the new owner?

Post by BitTooAggressive »

nisiprius wrote: Sun Mar 31, 2024 8:09 am
BitTooAggressive wrote: Sun Mar 31, 2024 3:39 am
exodusNH wrote: Sun Mar 31, 2024 1:40 am It's one of the risks involved in investing in international stocks. The government can always change the rules or find themselves on the wrong side of sanctions.
It could happen in the United States also. This is just not an international risk.
In absolute terms, sure. But in sensible judgement of degree, the risk is higher in emerging markets than in developed markets. Every prospectus I've seen says so. For example, Vanguard's for VWO, the Vanguard FTSE Emerging Markets Index ETF:
Principal risks:

Emerging markets risk, which is the chance that the stocks of companies located in emerging markets will be substantially more volatile, and substantially less liquid, than the stocks of companies located in more developed foreign markets because, among other factors, emerging markets can have greater custodial and operational risks; less developed legal, tax, regulatory, financial reporting, accounting, and recordkeeping systems; and greater political, social, and economic instability than developed markets.
I try not to be a big flag-waver and I am aware of imperfections in my home country. I know that we aren't colored in with the palest tint on the corruption perceptions map. But it is absurd to suggest the risks are of comparable size in developed versus emerging markets.

Emerging markets. Take the risk or don't take it. If you take it, hope it will be rewarded, but don't pretend it isn't there. That isn't risk tolerance, that's risk denial.
Agree but the risk is not zero. [Political comment removed by moderator oldcomputerguy] Thinking it is not a possibility could be another form of recency bias.
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Re: If sanctioned stocks are "liquidated" who becomes the new owner?

Post by speer »

exodusNH wrote: Sun Mar 31, 2024 1:40 am
speer wrote: Sun Mar 31, 2024 1:14 am Example, Blackrock ETF "ERUS". They (Blackrock) cant trade (buy or sell) the underlying assets (Russian stocks) because US government put sanctions on Russia who in return banned foreign clients from selling. Blackrock non the less is "liquidating" the ETF.

Does this mean Blackrock is essentially forfeiting ownership? Does Blackrock contact MOEX ( Moscow Exchange) and say: "Hey, we dont want these stocks anymore, you can keep em"? Who becomes the new owners of these shares?

From my view it looks like Blackrock would be essentially donating these shares to MOEX who can then do with it as they please, example sell the shares domestically for free money. Is this correct?
Essentially, yes. You can read other stories of nationalization.

All the Russian companies became worthless to anyone not in Russia or the very small allied group.

It's one of the risks involved in investing in international stocks. The government can always change the rules or find themselves on the wrong side of sanctions.
Interesting. Makes more sense now. Lesson learned is to not use ETF's / managed funds but instead invest in individual stocks especially for foreign countries so the fund manager doesn't donate your investment to a foreign benefactor because politics made it a little inconvenient. If it was individual stocks there is no one else "managing" it and I believe no one would be force you to give your ownership to someone else for free like Blackrock is with ERUS.

Frankly im disgusted with Blackrocks actions and see it as theft. If they dont want to inconvience themselves with Russian stocks thats fine but they should offer an option to the owners of the fund to retain their shares or claim ownership of the holdings. Im not sure how exactly the composition of a Russian ETF works, would Blackrock have the ADR's behind the ETF or would they hold the direct shares in a Russian account? Not exactly sure.
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Re: If sanctioned stocks are "liquidated" who becomes the new owner?

Post by Hacksawdave »

BitTooAggressive wrote: Sun Mar 31, 2024 3:39 am
exodusNH wrote: Sun Mar 31, 2024 1:40 am
speer wrote: Sun Mar 31, 2024 1:14 am Example, Blackrock ETF "ERUS". They (Blackrock) cant trade (buy or sell) the underlying assets (Russian stocks) because US government put sanctions on Russia who in return banned foreign clients from selling. Blackrock non the less is "liquidating" the ETF.

Does this mean Blackrock is essentially forfeiting ownership? Does Blackrock contact MOEX ( Moscow Exchange) and say: "Hey, we dont want these stocks anymore, you can keep em"? Who becomes the new owners of these shares?

From my view it looks like Blackrock would be essentially donating these shares to MOEX who can then do with it as they please, example sell the shares domestically for free money. Is this correct?
Essentially, yes. You can read other stories of nationalization.

All the Russian companies became worthless to anyone not in Russia or the very small allied group.

It's one of the risks involved in investing in international stocks. The government can always change the rules or find themselves on the wrong side of sanctions.
It could happen in the United States also. This is just not an international risk.
Fund shareholder proxy could also derail investments in particular US funds through proxy vote. Remember Vanguard Proposal number 7? While this would not make the fund’s assets worthless, it would restructure or at worse cause fund liquidation to the holder.
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Re: Do Russian stock holders in the west have any chance of recovery?

Post by LadyGeek »

I merged speer's thread into a similar discussion. The combined thread is now in the Investing - Theory, News & General forum (general discussion).

(Thanks to the member who reported the post and provided a link to this thread.)
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Re: If sanctioned stocks are "liquidated" who becomes the new owner?

Post by exodusNH »

speer wrote: Sun Mar 31, 2024 1:05 pm
exodusNH wrote: Sun Mar 31, 2024 1:40 am
speer wrote: Sun Mar 31, 2024 1:14 am Example, Blackrock ETF "ERUS". They (Blackrock) cant trade (buy or sell) the underlying assets (Russian stocks) because US government put sanctions on Russia who in return banned foreign clients from selling. Blackrock non the less is "liquidating" the ETF.

Does this mean Blackrock is essentially forfeiting ownership? Does Blackrock contact MOEX ( Moscow Exchange) and say: "Hey, we dont want these stocks anymore, you can keep em"? Who becomes the new owners of these shares?

From my view it looks like Blackrock would be essentially donating these shares to MOEX who can then do with it as they please, example sell the shares domestically for free money. Is this correct?
Essentially, yes. You can read other stories of nationalization.

All the Russian companies became worthless to anyone not in Russia or the very small allied group.

It's one of the risks involved in investing in international stocks. The government can always change the rules or find themselves on the wrong side of sanctions.
Interesting. Makes more sense now. Lesson learned is to not use ETF's / managed funds but instead invest in individual stocks especially for foreign countries so the fund manager doesn't donate your investment to a foreign benefactor because politics made it a little inconvenient. If it was individual stocks there is no one else "managing" it and I believe no one would be force you to give your ownership to someone else for free like Blackrock is with ERUS.

Frankly im disgusted with Blackrocks actions and see it as theft. If they dont want to inconvience themselves with Russian stocks thats fine but they should offer an option to the owners of the fund to retain their shares or claim ownership of the holdings. Im not sure how exactly the composition of a Russian ETF works, would Blackrock have the ADR's behind the ETF or would they hold the direct shares in a Russian account? Not exactly sure.
That is not the lesson I'd take.

It's simply a risk.

The companies became uninvestable. Sure, you could have technically held on to individual shares, but you wouldn't have been able to get dividends or to sell the shares. And certainly, there's nothing stopping the country from seizing the assets anyway. It's not a big step from forbidding "unfriendly" people from selling.

Not to mention because foreigners were not able to sell, the market valuations were essentially random. Once this is over, there's not telling what shape those companies would have been in anyway. Russia basically only exported some low-quality grain, minerals, fertilizer, and energy. Nearly everything else required imports. (They did also export weapons, but even their closest partner that has a good ties to the rest of the world, India, had already moved away from them because of quality issues. This was before the war demonstrated how bad some of their weapons were.)

With all of that said, Russia wasn't a very large economy to begin with. Maybe they were 3% of an ex-US holding. I'm about 20% ex-US; my total exposure was 3% of 20%. Not enough to worry about. The demand for whatever products and services they provided will be filled by other countries. Long term, it'll be neutral to positive.
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Re: If sanctioned stocks are "liquidated" who becomes the new owner?

Post by Valuethinker »

speer wrote: Sun Mar 31, 2024 1:05 pm
exodusNH wrote: Sun Mar 31, 2024 1:40 am
speer wrote: Sun Mar 31, 2024 1:14 am Example, Blackrock ETF "ERUS". They (Blackrock) cant trade (buy or sell) the underlying assets (Russian stocks) because US government put sanctions on Russia who in return banned foreign clients from selling. Blackrock non the less is "liquidating" the ETF.

Does this mean Blackrock is essentially forfeiting ownership? Does Blackrock contact MOEX ( Moscow Exchange) and say: "Hey, we dont want these stocks anymore, you can keep em"? Who becomes the new owners of these shares?

From my view it looks like Blackrock would be essentially donating these shares to MOEX who can then do with it as they please, example sell the shares domestically for free money. Is this correct?
Essentially, yes. You can read other stories of nationalization.

All the Russian companies became worthless to anyone not in Russia or the very small allied group.

It's one of the risks involved in investing in international stocks. The government can always change the rules or find themselves on the wrong side of sanctions.
Interesting. Makes more sense now. Lesson learned is to not use ETF's / managed funds but instead invest in individual stocks especially for foreign countries so the fund manager doesn't donate your investment to a foreign benefactor because politics made it a little inconvenient. If it was individual stocks there is no one else "managing" it and I believe no one would be force you to give your ownership to someone else for free like Blackrock is with ERUS.

Frankly im disgusted with Blackrocks actions and see it as theft. If they dont want to inconvience themselves with Russian stocks thats fine but they should offer an option to the owners of the fund to retain their shares or claim ownership of the holdings. Im not sure how exactly the composition of a Russian ETF works, would Blackrock have the ADR's behind the ETF or would they hold the direct shares in a Russian account? Not exactly sure.
If you held individual shares in Russian companies, I think you lost that as well? See Yandex. The residual "stub" of non-Russian assets will remain.

In essence, this is the ultimate insider trade. Russian management & friends buys out the assets of Russian companies at a discount price. See "Tunneling" in the Corporate Governance literature. This happened with Yukos, one of the world's largest oil companies, in 2003 as I recall. It also happened to Shell Oil in Sakhalin (natural gas project on East Coast of Siberia).

So there's no protection here.
Frankly im disgusted with Blackrocks actions and see it as theft.
If it was theft, then there'd be civil lawsuits (the criminal standard of guilt is much higher). I don't know that these are occurring? Therefore I doubt it was theft.

(I held the Emerging Market Dividends ETF, as a proxy for EM Value. It was 20% in Russia so NAV dropped -20% essentially overnight).

If you want to own individual shares, then do so. Wipro in India comes to mind as an example of the challenges (fraud, followed by collapse, of one of the world's largest listed IT outsourcing cos).

If you want the kind of exposure Russian stocks gave you, then you should consider overweighting mining companies - Glencore, BHP, Rio Tinto. They all have substantial operations in unsavoury places. Oil & Gas I don't think you need - you can get that by overweighting Canada, or a US E&P ETF. Russian consumer stocks? Well tbh the Russian consumer is not a terribly attractive market as the country moves back towards "war communism" (that's actually a 1920/21 term, from the Civil War)-- a largely state driven economy, focused on defence/ military production and control of resources.
Valuethinker
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Re: If sanctioned stocks are "liquidated" who becomes the new owner?

Post by Valuethinker »

exodusNH wrote: Mon Apr 01, 2024 7:39 am
speer wrote: Sun Mar 31, 2024 1:05 pm
exodusNH wrote: Sun Mar 31, 2024 1:40 am
speer wrote: Sun Mar 31, 2024 1:14 am Example, Blackrock ETF "ERUS". They (Blackrock) cant trade (buy or sell) the underlying assets (Russian stocks) because US government put sanctions on Russia who in return banned foreign clients from selling. Blackrock non the less is "liquidating" the ETF.

Does this mean Blackrock is essentially forfeiting ownership? Does Blackrock contact MOEX ( Moscow Exchange) and say: "Hey, we dont want these stocks anymore, you can keep em"? Who becomes the new owners of these shares?

From my view it looks like Blackrock would be essentially donating these shares to MOEX who can then do with it as they please, example sell the shares domestically for free money. Is this correct?
Essentially, yes. You can read other stories of nationalization.

All the Russian companies became worthless to anyone not in Russia or the very small allied group.

It's one of the risks involved in investing in international stocks. The government can always change the rules or find themselves on the wrong side of sanctions.
Interesting. Makes more sense now. Lesson learned is to not use ETF's / managed funds but instead invest in individual stocks especially for foreign countries so the fund manager doesn't donate your investment to a foreign benefactor because politics made it a little inconvenient. If it was individual stocks there is no one else "managing" it and I believe no one would be force you to give your ownership to someone else for free like Blackrock is with ERUS.

Frankly im disgusted with Blackrocks actions and see it as theft. If they dont want to inconvience themselves with Russian stocks thats fine but they should offer an option to the owners of the fund to retain their shares or claim ownership of the holdings. Im not sure how exactly the composition of a Russian ETF works, would Blackrock have the ADR's behind the ETF or would they hold the direct shares in a Russian account? Not exactly sure.
That is not the lesson I'd take.

It's simply a risk.

The companies became uninvestable. Sure, you could have technically held on to individual shares, but you wouldn't have been able to get dividends or to sell the shares. And certainly, there's nothing stopping the country from seizing the assets anyway. It's not a big step from forbidding "unfriendly" people from selling.

Not to mention because foreigners were not able to sell, the market valuations were essentially random. Once this is over, there's not telling what shape those companies would have been in anyway. Russia basically only exported some low-quality grain, minerals, fertilizer, and energy. Nearly everything else required imports. (They did also export weapons, but even their closest partner that has a good ties to the rest of the world, India, had already moved away from them because of quality issues. This was before the war demonstrated how bad some of their weapons were.)

With all of that said, Russia wasn't a very large economy to begin with. Maybe they were 3% of an ex-US holding. I'm about 20% ex-US; my total exposure was 3% of 20%. Not enough to worry about. The demand for whatever products and services they provided will be filled by other countries. Long term, it'll be neutral to positive.
Arguably Russia is exporting drones, cruise missiles and artillery shells at a ferocious rate. To Ukrainian customers. Ukrainians would say they are also gifting quite a few tanks :? :? :wink:
Mr. Rumples
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Re: Do Russian stock holders in the west have any chance of recovery?

Post by Mr. Rumples »

Valuethinker wrote: Sun Mar 24, 2024 1:09 pm
speer wrote: Sun Mar 24, 2024 1:01 pm No politics please.

I (American) own ERUS ishares that stopped trading in 2022 when the conflict started. I have no problem holding the assets for ever or even let a Russian fiduciary hold it for me in "frozen" status until things settle down. Im sure in in 10+ years things will settle down and trading commence again.

What I do not want however (which is currently happening) is Blackrock force liquidating, especially now where it cannot be traded, its essentially an almost 100% loss. So if had $100,000 invested your liquidation will be like $50. I would be okay with Blackrock dissolving but if they offered for example each holder gets a non-tradable right to their share of the proceeds that expires in the year 2099 or whenever the last share is sold - or some other options to redeem the proceeds in a Russian brokerage.

Anyone aware of any options?
Remembering that there were American holders of Imperial Russian bonds issued before the Revolution in 1917 ...

There's been discussion here about Yandex shares and what is going on there. So that may give you a steer if you search the thread.
Alas, debt repudiation has a long history as does "honoring" it but at a mere pittance of its value. In 1986 Russia and the UK agreed to a 1.6% compensation for Imperial Russian bonds; the French got 1%.

After the Civil War, Confederate bond holders continued to have hope that the US govt. would honor the bonds despite the prohibition in the 14th Amendment. Some bonds continued to circulate in hopes of redemption and they earned the name "Zombie bonds." In 1964 the last of the bonds being held in a vault in London were released to the collectors market. Some Confederate bonds are selling at 10 times their face value; however, that is far below their interest rates of 7 to 8 percent.
"History is the memory of time, the life of the dead and the happiness of the living." Captain John Smith 1580-1631
Valuethinker
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Re: Do Russian stock holders in the west have any chance of recovery?

Post by Valuethinker »

Mr. Rumples wrote: Tue Apr 02, 2024 5:54 am
Valuethinker wrote: Sun Mar 24, 2024 1:09 pm
speer wrote: Sun Mar 24, 2024 1:01 pm No politics please.

I (American) own ERUS ishares that stopped trading in 2022 when the conflict started. I have no problem holding the assets for ever or even let a Russian fiduciary hold it for me in "frozen" status until things settle down. Im sure in in 10+ years things will settle down and trading commence again.

What I do not want however (which is currently happening) is Blackrock force liquidating, especially now where it cannot be traded, its essentially an almost 100% loss. So if had $100,000 invested your liquidation will be like $50. I would be okay with Blackrock dissolving but if they offered for example each holder gets a non-tradable right to their share of the proceeds that expires in the year 2099 or whenever the last share is sold - or some other options to redeem the proceeds in a Russian brokerage.

Anyone aware of any options?
Remembering that there were American holders of Imperial Russian bonds issued before the Revolution in 1917 ...

There's been discussion here about Yandex shares and what is going on there. So that may give you a steer if you search the thread.
Alas, debt repudiation has a long history as does "honoring" it but at a mere pittance of its value. In 1986 Russia and the UK agreed to a 1.6% compensation for Imperial Russian bonds; the French got 1%.

After the Civil War, Confederate bond holders continued to have hope that the US govt. would honor the bonds despite the prohibition in the 14th Amendment. Some bonds continued to circulate in hopes of redemption and they earned the name "Zombie bonds." In 1964 the last of the bonds being held in a vault in London were released to the collectors market. Some Confederate bonds are selling at 10 times their face value; however, that is far below their interest rates of 7 to 8 percent.
I vaguely recall that when Peoples Republic of China and the USA restored diplomatic relations, they agreed to settlement of debts issued by the previous Chinese government (whether this was the Imperial one, or the Nationalist (Republican) one in place after 1912, I do not remember). Less than 1 cent on the dollar, I think.

I believe I am right in saying that Finland found a way to continue honouring its debts to the USA even during WW2, (or maybe restarting post WW2), despite being allied with Germany in the "Continuation War" (from the 1939-40 Winter War with Stalin) as the period 1942-44 is known in Finland.
Walkure
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Re: If sanctioned stocks are "liquidated" who becomes the new owner?

Post by Walkure »

speer wrote: Sun Mar 31, 2024 1:05 pm Frankly im disgusted with Blackrocks actions and see it as theft. If they dont want to inconvience themselves with Russian stocks thats fine but they should offer an option to the owners of the fund to retain their shares or claim ownership of the holdings. Im not sure how exactly the composition of a Russian ETF works, would Blackrock have the ADR's behind the ETF or would they hold the direct shares in a Russian account? Not exactly sure.
In most cases the prospectus of an ETF does allow for distribution of the holdings in-kind but there is always some sort of limitation to blocks of a minimum number of shares, typically the same size as a "creation/redemption unit" (usually 50,000 shares) and a disclaimer that this is requirement is not likely to be met by an individual retail holder.
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firebirdparts
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Re: Do Russian stock holders in the west have any chance of recovery?

Post by firebirdparts »

Short answer is yes. memes are not allowed here but just picture that I'm saying there's a chance.

If you liquidate now then I guess you'll be stuck in the present.
This time is the same
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Re: If sanctioned stocks are "liquidated" who becomes the new owner?

Post by Chili Powder »

speer wrote: Sun Mar 31, 2024 1:05 pm
Interesting. Makes more sense now. Lesson learned is to not use ETF's / managed funds but instead invest in individual stocks especially for foreign countries so the fund manager doesn't donate your investment to a foreign benefactor because politics made it a little inconvenient. If it was individual stocks there is no one else "managing" it and I believe no one would be force you to give your ownership to someone else for free like Blackrock is with ERUS.

Frankly im disgusted with Blackrocks actions and see it as theft. If they dont want to inconvience themselves with Russian stocks thats fine but they should offer an option to the owners of the fund to retain their shares or claim ownership of the holdings. Im not sure how exactly the composition of a Russian ETF works, would Blackrock have the ADR's behind the ETF or would they hold the direct shares in a Russian account? Not exactly sure.
The actual lesson is the opposite. If you were properly globally diversified the loss from Russian stocks would be unnoticeable. You picking, and picking extremely poorly, to buy stocks from an individual country is why you are having the problems you are having. Picking individual stocks would amplify this kind of risk.
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