KPPA statement on Russian investments:
May 17, 2022: There have been no real
changes with respect to KPPA’s exposure to equity holdings domiciled in Russia.
The portfolio contains some holdings that cannot be traded at this time;
however, those companies continue to operate and potential future residual
value exists. The values of those holdings have been written down to near zero
and the effect on investment performance has been realized. KPPA continues to
work with the third-party managers whose portfolios contain these residual
Russian investment holdings and who control the purchase and sale of those
Original statement from March 8, 2022: Understandably, given the war in Ukraine, there is concern among retirees, members, and the general public about KPPA exposure to equity holdings domiciled in Russia. Here are the facts:
Of the approximately $22.8 billion in assets administered by the Kentucky Public Pensions Authority (KPPA), about $35.3 million of that is exposed to Russian securities. That amounts to 0.15% of the total portfolio.
The systems operated by KPPA have exposure to Russia because of our investments in emerging markets. These investments are managed by third-party managers, who control the purchase and sale of holdings in their portfolios. Some index providers, including MSCI and FTSE, are in the process of removing Russian stocks from their emerging markets indexes, which would lead funds that track those indexes to also remove Russian exposure in order to maintain correlation with the index.
KPPA investment staff are evaluating options. Russian markets have been closed, so selling securities that trade on those markets has not been possible.
This small exposure to Russian securities in no way affects the systems' abilities to pay benefits. All benefits will continue to be paid as normal.
Any action concerning Russian securities should be based on the outlook, valuation and perceived risk of that security. As much as we want to support Ukraine during this invasion by Russia, and liquidate Russian investments in our funds, the trustees of the systems are fiduciaries to the members and their beneficiaries. We are required to follow IRS code and Kentucky Revised Statutes 61.510 to 61.705, 78.510 to 78.820, and 16.505 to 16.652, which require the plans be managed exclusively for the benefit of members and their beneficiaries and the money dedicated to paying their retirement and insurance benefits.
The assets in the County Employees Retirement System (CERS), the Kentucky Employees Retirement System (KERS), and the State Police Retirement System (SPRS), are overseen by the trustees of the CERS and Kentucky Retirement Systems (KRS) boards. While we appreciate suggestions from the state elected officials and others to divest of Russian holdings, only the trustees have the authority to effect fund transactions.
KPPA staff and the trustees of the CERS and KRS boards continue to monitor the situation in Ukraine with concern.