VanEck to Dissolve Russia ETFs as War Hobbles Investments

VanEck Associates Corp., one of the biggest issuers of exchange-traded funds in the U.S., is shuttering its Russia-focused ETFs as fallout from the invasion of Ukraine rendered investing in the country all but impossible. 

The asset manager, with $68 billion in assets, said in a Dec. 28 statement that it’s shuttering the VanEck Russia ETF (RSX) and the VanEck Russia Small-Cap ETF (RSXJ), citing the funds’ “inability to buy, sell, and take or make delivery of Russian securities.” New York-based VanEck said it suspended fund redemptions ahead of the expected liquidation and distribution of assets on or about Jan. 12. 

The liquidations follow similar moves recently at issuers including BlackRock Inc. and Franklin Templeton, which are closing Russia funds following the country’s invasion of Ukraine. Trading in Russian assets is difficult and illegal in many cases due to sanctions against the country, and many ETFs no longer trade. VanEck stopped creating new shares in its Russia ETFs in March, it said in a filing. 

“A substantial number of the Funds’ positions” were made illiquid due to “geopolitical affairs and sanctions,” VanEck’s statement read, adding that the current environment makes it “impossible to manage the Funds consistent with their investment objectives.” VanEck didn’t respond to a request for comment from ETF.com. 

Russian stocks themselves have plummeted: the ruble-denominated MOEX index has dropped 38% this year. RSX, which launched nearly 15 years ago, tracks an index of Russian companies weighted by market cap. It collapsed 79% this year, and assets under management plummeted to $35 million. RSXJ, launched in 2011, tracks a weighted index of small-cap Russian securities and depository receipts. It’s lost 66% this year, and the fund’s assets have dropped to $400,000, according to ETF.com data. 

VanEck’s move comes a week after Franklin Templeton Investments said it was liquidating its Franklin FTSE Russia ETF (FLRU), which followed BlackRock Inc.’s August announcement of dissolving its iShares MSCI Russia ETF (ERUS). 

Contact Zoya Mirza at [email protected]