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More than a dozen Canadian fund managers hold shares of Russian companies that have been on Canada’s trading sanctions list since 2015, but money managers may struggle to find buyers as they now seek to eliminate their exposure to the rogue nation.

The asset management divisions of several banks and two of Canada’s largest insurers are among the fund managers that have the Russian stocks in their mutual funds and exchange-traded funds. Independent fund giants AGF Investments, IGM Financial Inc., Fidelity Investments Canada ULC and Vanguard Investments Canada Inc. also hold Russian stocks in their funds.

No ETFs or mutual funds in Canada are made up entirely of Russian stocks, but fund managers still have exposure to the country in their emerging markets funds, particularly those that concentrate on Eastern Europe.

The holdings include stocks in several companies listed in Canada’s Special Economic Measures (Russia) Regulations, developed in 2015 after Russia invaded Crimea in Ukraine. Managers also hold stock in Russian companies that are not included under the Canadian regulations.

The 2015 regulations prohibited participation in new debt or equity financings of more than a dozen Russian companies, including large banks and energy companies that trade on international stock exchanges: Gazprom; Sberbank of Russia; Novatek; Rosneft Oil Co.; Transneft;, Surgutneftegas; and VTB Bank.

The financing regulations didn’t apply to shares owned before the companies were added to the list, meaning the Canadian investors could keep their stakes after the restrictions were announced.

However, the widespread international condemnation of Russia’s invasion of Ukraine has made holding those stocks reputationally toxic, even if it is legal.

To assess funds’ holdings, The Globe and Mail reviewed ownership records from Bloomberg and S&P Global Market Intelligence, including some records provided by, an environmental activist group that wants to call attention to how Canadian institutions finance Russian oil and gas. It also received fund data from research company Morningstar.

Caisse de dépôt et placement du Québec, the only major Canadian pension fund with significant disclosed Russian holdings, said last week it sold more than $300-million worth of stock in Russian companies on the restricted list.

Alberta Investment Management Co. and British Columbia Investment Management Corp. also said this week they would sell their Russian holdings, with BCI saying it would take time to dispose of $107-million in Russian stock, but trading in these securities has now ground to a halt, given international sanctions, trading restrictions and Russia’s ban on foreigners selling Russian securities.

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Dozens of Canadian business leaders signed an open letter to the Canadian government this week pledging to “do what we can to support you in isolating Russian leadership by unwinding commercial relationships and divesting Russian holdings.” Kevin McCreadie, chief executive officer of AGF Management Ltd., is the only signatory who is an executive at one of the fund managers in The Globe review.

While some investment companies say they want to clear Russian holdings off their books, many may find they can’t because of a lack of potential buyers, trading halts on some stock exchanges, price declines and uncertainty about whether the trades could be completed.

According to data from Morningstar, 150 stock or bond funds in Canada have some Russian holdings. All told, the holdings equal $1.2-billion in stocks and nearly $1-billion in bonds.

The Globe review also found fund managers that owned some stocks of Russian companies on the restricted list, including investment arms of Manulife Financial Corp., Canadian Imperial Bank of Commerce, Bank of Nova Scotia and Bank of Montreal, as well as international giants such as HSBC, Fidelity and Vanguard. CIBC and BMO’s asset managers hold shares of six companies on Canada’s 2015 restricted list, according to S&P Global Market Intelligence.

When contacted by The Globe, many managers of mutual funds and ETFs said their Russian holdings were minimal or very limited compared to their overall portfolios: Far less than 1 per cent, in all cases the companies specifically cited.

Still, many Canadians have been contacting wealth managers to ensure their portfolios have zero Russian exposure. “They do not want to aid Russia in any way whatsoever,” said Charlie Spiring, founder of independent wealth manager Wellington-Altus Financial Inc. “We did a sweep to ensure we had zero exposure.”

Russian-share ownership, while small, is still widespread across the Canadian fund industry.

About one-third of the investment funds that hold Russian assets have 2 per cent or less of their assets there, and just 20 have 5 per cent or more. Only about two dozen track an index for their investments, and the rest are actively managed funds for which the investment companies have discretion where to invest.

HSBC’s BRIC Equity Fund Investor Series – the “R” stands for Russia – had 22.6 per cent of its portfolio in Russia as of Dec. 31, according to Morningstar, with Gazprom making up 6.3 per cent; Lukoil 5.4 per cent; and Sberbank just over 5 per cent. According to Morningstar data, it’s the only Canadian fund with more than 10 per cent of its holdings in Russia.

In response to questions about HSBC’s holdings of companies on Canada’s restrictions list, spokesperson Caroline Creighton said in an e-mailed statement: “HSBC complies with all international sanctions everywhere that we operate.” She did not provide any details on whether HSBC was going to sell its Russian holdings.

Mawer Investment Management Ltd.’s emerging markets fund, with 8.636 per cent of its holdings in Russia, has the most exposure of any fund managed by a Canadian parent company.

Mawer CIO Paul Moroz said in an e-mail that the company “has made the decision to exit all of its Russian holdings.”

Sberbank is one of the more popular restricted Russian holdings among big investors worldwide. S&P Global Market Intelligence counts nine Canadian fund managers holding the shares as of their most recent disclosure reports.

BMO spokesperson Jeff Roman said in an e-mail that the bank’s mutual funds and ETFs “do not have significant exposure to the region.” But the bank did not provide answers on whether it would sell its Russian holdings.

Bank of Nova Scotia and CIBC did not respond to The Globe’s questions on whether they were considering divestment of Russian assets.

Manulife Financial Corp. has several emerging markets funds that include Russian shares – as well as an emerging markets Eastern Europe Fund that has four companies on the Canadian restrictions list among its top holdings.

”We, and our sub-advisors, manage assets on behalf of some clients where a relatively small exposure to Russian companies exists within the portfolios,” Manulife spokesperson Cheryl Holmes said in an e-mail. “We are addressing directly any specific questions or directives clients with exposure to Russia may have regarding exiting those positions.”

Manulife did not address whether it is looking to sell the Russian positions.

Several of the fund companies contacted by The Globe about their Russian holdings said they plan to sell as soon as practicable.

AGF spokesperson Amanda Marchment said in an e-mail the process is under way, and the company is “committed to divesting from Russian holdings in due course and as exchanges re-open.”

ETF provider Horizons ETFs Management (Canada) Inc. has several emerging markets funds with less than 2.2-per-cent exposure, but spokesperson Jonathan McGuire said the company will be looking for “opportunities to potentially exit those positions, when possible.”

Canadian asset managers with investment funds that track an index may also need co-operation from the company that created and maintains that index. MSCI Inc., one of the world’s biggest index managers, weights Russia at 3.24 per cent of its emerging market benchmark and around 0.3 per cent in its global benchmark.

It is consulting with investors about removing Russian securities from its indices. Dimitris Melas, MSCI’s head of index research and chair of its index policy committee, told Reuters on Monday it would not make a lot of sense for the index “to continue to include Russian securities if our clients and investors cannot transact in the market.”

With a report from Tim Shufelt

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