Florida pension fund stuck with $300 million in Russian investments – Orlando Sentinel

$300 million of Florida’s nearly $200 billion public pension portfolio is invested in Russian companies, even as the pariah nation faces mounting accusations of genocide and other war crimes in Ukraine.

Democrats want Florida to divest of that tiny portion of the fund, arguing that state leaders should act quickly to get rid of Russian investments. Florida’s holdings include Russian oil producers, mining companies and the nation’s largest bank, according to a study in late January.

Florida’s chief investment officer said the state’s hands are tied because Russia has blocked foreign markets and leaders are taking a “deliberative approach.”

Officials from 25 states have issued orders to divest any Russian-held investments or review Russian investments, according to Stateside, a government consultancy firm that tracks the legislation. Lawmakers in at least 19 states have introduced divestiture legislation.

Although Florida has not decided to divest, lawmakers have ordered a review of state contracts to check taxpayer money that may be going to Russian-based companies. The results must be reported to the legislature by December 1.

Q: Why is Florida investing in Russia?

Sean Snaith, an economist at the University of Central Florida, said it was “standard operating procedure” for large public pension funds to invest in “emerging markets” as a means of diversification, which which includes investments in Russia before the war.

“It’s a pretty low percentage overall,” Snaith said. “Just like mutual funds or pension funds diversify in one sector of the economy of a given country, they also diversify between countries. It is a means of mitigating country-specific risks. It is a fairly common practice. »

The State Board of Trustees, which is in charge of state pension funds, has about $300 million in Russian investments out of $195 billion in assets, said Dennis MacKee, gatekeeper. word of the council, shortly after the start of the war at the end of February.

The value of these investments has likely decreased significantly with US and international sanctions hitting the Russian economy.

MacKee had no estimate of the current value of the Russian investments.

Q: Can Florida give in?

Severing Florida’s financial ties with Russia is complex, Snaith said.

The Russian stock market has reopened, but foreigners are banned from selling shares. Pension managers are “unable to liquidate even if they wanted to,” Snaith said.

Lamar Taylor, acting executive director and chief investment officer of the state board, told a Florida cabinet meeting on March 29 that Russian stock markets had been closed to foreign investors since February 25.

“If we were forced to divest today…even if we could…the only thing that would do would be to insure a realized loss for the Florida Retirement System defined benefit pension plan,” Taylor said. “It’s an outcome we seek to mitigate by taking a more deliberative approach and ensuring that our managers act as fiduciaries in the best economic interests of the plan.”

Taylor said his agency is complying with all U.S. sanctions.

The state’s Board of Directors is overseen by three trustees elected by Florida voters: Governor Ron DeSantis, Chief Financial Officer Jimmy Patronis, and Attorney General Ashley Moody.

At the Cabinet meeting, DeSantis asked Taylor if it would violate the fiduciary duties of the Board of Directors of the State “if you liquidated with massive losses for political reasons, rather than in the best interests of the beneficiaries.”

Taylor said it would.

DeSantis suggested the Legislature could act to provide policy direction to avoid investing in countries hostile to U.S. interests when State Rep. Paul Renner becomes Speaker of the House after the November election.

Q: What are the Democrats saying?

Democratic gubernatorial candidates say Florida should act more urgently to punish Russian President Vladimir Putin by at least trying to withdraw state investments.

“Unfortunately, we have a governor who was slow to react to the invasion, slow to condemn Putin, and who was very soft on Russia,” said Nikki Fried, state agriculture commissioner and lone Democrat. elected statewide.

She added, “Florida has a responsibility to the people of our state to stand together in the fight for democracy.”

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U.S. Representative Charlie Crist and State Senator Annette Taddeo, two other Democratic gubernatorial candidates, also called on Florida to divest.

Fried said she thinks DeSantis has the power to act and could be more vocal, citing the state’s stance on China.

In December, DeSantis and other Republican leaders ordered an audit of state investments in China that could lead to divestment. In a press release, DeSantis said “the Chinese Communist Party is not a vehicle we want to be entangled with.”

Florida lawmakers will meet for a special legislative session April 19-22, but Russian investments in the state are not on the agenda.

Q: What are Florida’s Russian holdings?

Here are the Florida holdings that “accounted for the vast majority of Russian investment exposure at the end of January,” according to the state’s Board of Directors.

  • Sberbank, majority state-owned banking and financial services company, headquartered in Moscow
  • Lukoil, one of Russia’s largest energy producers
  • Nornickel, one of the world’s largest producers of nickel and palladium and a major producer of copper and platinum
  • Polymetal International, one of the world’s top 10 gold producers and one of the world’s top five silver producers
  • Rosneft, a state-controlled oil giant
  • Magnit, one of Russia’s largest grocery chains
  • HeadHunter, an online recruitment platform
  • Ozon, an e-commerce platform
  • Novolipetsk Steel, one of Russia’s largest steel producers

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Dolores W. Simon