MSCI* announced yesterday that they will remove Russia from the MSCI Emerging Markets Index. The change will be implemented at the close of the trading day on March 9, 2022. Russia’s share of the MSCI Emerging Markets is 1.6%.
*MSCI is a leading provider of index services.
Which funds of the finpension offering are affected by this change?
The following two funds are based on the MSCI Emerging Markets Index or a corresponding sub-index and are therefore affected by the changeover:
- CSIF (CH) Equity Emerging Markets Blue DB (CH0017844686)
- CSIF (Lux) Equity Emerging Markets ESG Blue DB CHF (LU1587908150)
What happens to the money that these funds have invested in Russia?
The index solutions offered by finpension track the index one-to-one, i.e. they follow the index step by step. We therefore assume that the conversion will take place as follows (the decision on the conversion procedure by Credit Suisse has not yet been communicated):
- As of March 9, 2022, the allocation of the funds will be adjusted. The share previously allocated to Russia will be divided among the other countries and regions.
- As soon as the markets in Russia are open again, the funds will sell the Russian securities. We cannot say when this will be the case.
- The proceeds from the sale of the securities will then be invested by the fund in the countries that still belong to the index.
What is the expected loss?
CSIF (CH) Equity Emerging Markets Blue DB (CH0017844686)
Russia’s share in the MSCI Emerging Markets Index is 1.6% so far.
The performance of this share can be estimated using the following fund, which tracks MSCI Russia:
The performance since the beginning of the year is currently around minus 90%.
With respect to our investment strategies with the investment focus Global, the expected loss is between 0 and 0.14%, as you can see in the following table:
|Investment strategy||Weight MSCI Emerging Markets||Weight Russia in the MSCI Emerging Markets||Loss on the Russia portion||Expected loss for the investment strategy|
|finpension Global 0||0 %||1.6 %||90 %||0.00 %|
|finpension Global 20||2 %||1.6 %||90 %||0.03 %|
|finpension Global 40||4 %||1.6 %||90 %||0.06 %|
|finpension Global 60||6 %||1.6 %||90 %||0.09 %|
|finpension Global 80||8 %||1.6 %||90 %||0.12 %|
|finpension Global 100||10 %||1.6 %||90 %||0.14 %|
CSIF (Lux) Equity Emerging Markets ESG Blue DB CHF (LU1587908150)
The fund is based on the MSCI Emerging Markets ESG Leaders Index. The weight of Russia in the MSCI Emerging Markets ESG Leaders Index is 1.57% so far.
As there is no suitable index to value the Russian portion for this fund, we refrain from calculating the expected loss for the sustainable investment strategies. However, this is likely to be at a similar level as for the global strategies.
Which funds are not affected?
These funds are not affected by the change because they track a different index managed by J.P. Morgan:
- CSIF (CH) Bond Government Emerging Markets USD Blue DB (CH0259132105)
- CSIF (CH) Bond Government Emerging Markets USD Blue DBH (CH0259132261)