Kansas, Missouri push to shed Russian holdings from pension funds, but it will take time
As Russia’s invasion of Ukraine continues, leaders of public pension systems in Kansas and Missouri are pushing to sell off investments in Russian companies.
But the bipartisan scramble to divest will take time.
The Kansas Public Employees Retirement System (KPERS) holds $35.9 million in Russian securities, the Missouri State Employee Retirement System (MOSERS) about $9 million. The Missouri Local Government Employees Retirement System (LAGERS) has $8.3 million in Russian holdings.
Divestment pushes are nothing new – retirement systems faced pressure to abandon holdings in apartheid South Africa, for instance. But the speed with which pension officials are trying to shed Russian assets is extraordinary. Divestment efforts are already underway in Georgia, Pennsylvania, Colorado, New York and elsewhere.
The Russian investments by Kansas and Missouri pensions are only a tiny fraction of the billions managed by the systems. Still, offloading them often isn’t as simple as just calling a broker.
KPERS director Alan Conroy said Kansas’s holdings in Russian securities are part of broader investment funds, sometimes called index funds. MOSERS spokeswoman Candy Smith said the system doesn’t hold Russian securities directly, but uses external fund managers.
According to a public pension expert, it may be impossible to shed the Russian securities quickly without getting out of the funds entirely.
“You’d hate to see the pension fund cut off its nose to spite its face, which it could potentially do,” said Keith Brainard, research director at the National Association of State Retirement Administrators. “From the looks of things pension funds might do well to wait at least a few days and see what happens with these index providers.”
Index providers already face public pressure to divest, Brainard said, and may soon act on their own. Politicians in Kansas and Missouri were calling for swift action on Tuesday, however.
“Vladimir Putin is a madman and it’s time for the world to cut him off. In Missouri, that starts with MOSERS. When he is isolated and alone, Ukrainians and Russians will have their countries back. Missouri stands with the Ukrainian people.” Missouri Treasurer Scott Fitzpatrick, a MOSERS board member, said in a statement.
“I’m calling on all other Missouri pension plans to follow suit in ensuring no public funds are used to help prop up the Russian economy as long as these atrocities continue,” added Fitzpatrick, who is running for Missouri Auditor.
Fitzpatrick’s office said as Friday, MOSERS had about $13 million in Russian securities. Smith said that as of Tuesday, the system had about $9 million in investments — a possible sign the value of the holdings had shrunk significantly since last week.
A detailed list of Russian holdings provided by Missouri LAGERS gives insight into the kind of holdings pension systems are looking to offload. The system has $1.7 million in Russian ruble, the quickly devaluing Russian currency, along with stock in numerous companies. About $4.6 million is invested in Russian government bonds.
“At this time, the LAGERS Board of Trustees has not made any decision with regard to divestment in Russia, but is continuing to monitor current events,” spokeswoman Elizabeth Arnold said in a statement.
In Kansas, Conroy said the pension board has a fiduciary responsibility to do what’s best for the trust fund and members. Historically, he said, it has only taken investment action related to political realities when directed to by the Legislature.
If that happens, Conroy said, the board would direct its investors to disinvest in as prudent a time as possible. The board may also take that action on its own if it deems it financially responsible.
The KPERS board is not scheduled to meet until March 25 but Kansas Treasurer Lynn Rogers, a Democrat, said in a statement that Kansas should “continue to work to divest” from Russian securities “as soon as possible.”
“I’m in full support of the financial sanctions placed against Russia – the aggressor in this escalating war,” Rogers said in a statement. “I will be working with my fellow trustees to protect the interests of our members and their beneficiaries.”
In Missouri, the MOSERS board will hold an emergency meeting on Thursday. Calling an emergency meeting requires agreement from four of the board’s 10 voting members. Smith, the MOSERS spokeswoman, said the board will “discuss Russian exposure within MOSERS’ asset allocation.”
The current divestment effort isn’t the first time Missouri leaders have sought to block investment in Russia. In January 2017, Sen. Maria Chappelle-Nadal, a University City Democrat, filed a bill that would have prohibited state and local government agencies from contracting with or investing in individuals, partnerships, corporations or other organizations doing business with Russia.
At the time, Chappelle-Nadal cited cyber attacks by Russian operatives during the 2016 presidential election.
Senate Minority Leader John Rizzo, an Independence Democrat, introduced a similar bill Tuesday that would require Missouri to unwind Russian investments.
“So long as the tyrant Putin is in power, Missouri should cut its financial ties with his murderous regime,” Rizzo said in a statement. “In 2017, a Democratic bill was put forward to divest Missouri’s assets from Russia, and I’m pleased there is now bipartisan interest in this effort.”
This story was originally published March 1, 2022 at 4:16 PM with the headline "Kansas, Missouri push to shed Russian holdings from pension funds, but it will take time."
