This article originally featured on The Indian Weekender and was written by Navdeep Kaur Marwah.
The Russia-Ukraine conflict has had its impact on the entire world in one way or the other. But it has also affected New Zealanders, who are Kiwisaver account holders.
Yes, you read it right. There is a connection between Kiwisaver investments done by respective providers and the crisis. That's because not many know that Kiwisaver funds are invested in Russian government bonds and companies by the Kiwisaver providers.
Barry Coates, Founder and CEO, Mindful Money (a charity that researches the responsible investment credentials of Kiwisaver schemes and helps people choose funds that match their personal ethical beliefs) says, “Many New Zealanders are starting to realise that their Kiwisaver funds have been invested in Russian government bonds or companies close to the Putin regime.
“They have been shocked that their money has supported the financing of Putin’s invasion of Ukraine. Mindful Money’s analysis shows hundreds of Kiwisaver and investment funds have been invested in those companies. To make matters worse, the Kiwisaver funds that were slow to sell off their holdings have lost over 90 per cent of the value of those investments.”
Coates further says that investors are pulling their funds out of Russian investments around the world, contributing to the collapse of share prices and a drop in the value of the Russian rouble. “This is an important action that can be undertaken by everyone concerned about Russian aggression against Ukraine. There are lessons to be learned. Many funds say they invest ethically or responsibly, but we can now see that they have failed to address one of the most high profile risks of the past decade. Investors need to find out what companies their Kiwisaver or investment funds are invested in and choose an ethical option.”
And now, after the crisis, most of the investment in Russian companies are being divested by various Kiwisaver providers in NZ.
Indian Weekender spoke to some of the primary Kiwisaver providers in NZ to know their response to the situation and their advice to their clients.
Kristy Martin, External Communications Manager, Corporate Affairs of ANZ, says, "Last week ANZ Investments confirmed our funds, including Kiwisaver, now have no investments in Russia. When we saw the situation in Ukraine was rapidly deteriorating, we acted quickly and commenced divesting some $12m of Russian holdings we owned (representing less than 0.04% of Funds Under Management). This is in line with our responsible investing approach.”
Martin cautions that over the next weeks, markets will remain volatile due to any further sanctions that are threatened or enacted. “Energy prices and any expectations of supply disruptions will remain a key risk for markets. While the markets have clearly had a volatile start to 2022, we would urge investors to remain focussed on the long term and try to avoid making knee jerk or short term decisions. It is important to remember fund returns were strong over 2021, and indeed for the last ten years. People investing in Kiwisaver or other managed funds should focus on their own situation, including their tolerance for risk and their long-term financial goals. In this context, we would recommend talking to a financial advisor,” Martin said.
A Westpac spokesperson also confirmed that divesting of Kiwisaver funds in Russian government bonds and listed shares have happened. The spokesperson said, "Our Kiwisaver and Investments arm, BT Funds Management NZ, has fully divested from its holdings in Russian government bonds and listed shares. Before the invasion of Ukraine by Russia, these had made up just 0.1 percent of our total holdings. Additionally, BTNZ is in the process of divesting from companies which have a primary listing outside of Russia but which have significant Russian involvement or exposure.
“We expect to see some ongoing market volatility as a result of the events in Ukraine, and investors may see the value of their investments, including KiwiSaver, move up and down more than usual. However, this is a normal part of investing, and we encourage customers to focus on their long-term investment goals."
Responding to the Indian Weekender's query, ASB's External Communications Manager, Corporate Affairs, Bridget Catchpole said, “ASB has committed to removing all Russian assets from our investment funds and has begun the process of selling them. ASB Kiwisaver fund exposure to Russian assets is very low. Like other Kiwisaver providers, we are seeing our Kiwisaver funds fluctuate as financial markets both here and overseas respond to world events including the current Ukraine crisis.”
A message to those who have Kiwisaver with BNZ read, "In response to the situation in Ukraine, we will not be investing any BNZ Kiwisaver Scheme and Youwealth funds in Russia. This situation has had a significant impact on global financial markets, and you may notice a drop in BNZ Kiwisaver Scheme and Youwealth account balances.”
Commenting on the issue, Andrew Lance, COO of Simplicity NZ Ltd, another KiwiSaver provider, says, “ Our investments include a minimal investment in Russian government bonds, held as part of our global bond portfolio which is included in all of our diversified funds (Conservative, Balanced and Growth Funds). Vanguard manages our global bonds, and it has confirmed that it will be divesting the Russian bonds later this month. We have no shares listed in Russia.”
“The more widespread impact on financial markets of the Ukrainian invasion has been felt by commodity prices as both Ukraine and Russia are large producers of wheat in particular. The more widely reported impact has been on the oil price. This will exacerbate inflationary pressures that were already broadly an issue. Share markets globally have fallen as a reaction to these developments, and that is reflected in the negative returns from our funds over the last few weeks, as it will have been for all diversified funds.”