BlackRock hit by $17 billion in losses on Russian exposure

BlackRock, the world’s largest asset manager, suffered losses of around $17 billion (€15 billion) on its holdings of Russian securities due to the attack on Ukraine.

Clients held more than $18.2 billion in Russian assets at the end of January, the company said, but closed markets and global sanctions imposed after Russian President Vladimir Putin’s invasion of Ukraine made the big deal unsalable majority, which led BlackRock to depreciate them heavily.

Purchases

The company suspended all purchases of Russian assets on February 28 and revealed at that time that its holdings linked to the country had fallen to less than 0.01% of assets under management. A BlackRock spokesperson said the total value was around $1 billion on Feb. 28, when markets were effectively frozen, and the change was due to markdowns rather than asset sales.

The huge value destruction reflects both the scale of BlackRock – it has more than $10 billion in assets under management – and the damage Russia’s invasion of Ukraine has done to the broader financial system. .

Other major asset managers also have to write down billions of dollars of exposure. Pimco, for example, held at least $1.5 billion in sovereign debt and about $1.1 billion in bets on Russia through the credit default swap market before the war. Janus Henderson, Ashmore and Western Assets also have exposure to Russian debt, according to Morningstar.

U.S. banks Goldman Sachs and JPMorgan on Thursday announced plans to pull their businesses out of Russia, saying they were acting on government instructions.

Larry Fink, Managing Director of BlackRock, said in a LinkedIn post after the markdowns that “the situation has been very complex and fluid, and BlackRock will continue to actively consult with regulators, index providers and other market participants. to ensure that our clients can exit their positions in Russian securities, when and where regulatory and market conditions allow”.

Breakdown

BlackRock declined to give a breakdown of its Russian holdings or detail exactly which funds suffered which losses.

But the asset manager has written down the value of its largest Russian exchange-traded fund, ERUS, from around $600 million at the end of last year to a total value of less than $1 million. It suspended trading and waived management fees on all of its Russian ETFs as well as an emerging European fund that was heavily exposed to Russia. This fund had a net asset value of 622 million euros at the end of January, but was revised downwards to 269 million euros.

Should tensions and sanctions ease, Russian securities could begin to trade more freely again and recover some of their value. In this scenario, BlackRock’s funds and clients could benefit from the price recovery.

Copyright The Financial Times Limited 2022

Comments are closed.