BlackRock has announced that it will begin liquidating the portfolio of the iShares MSCI Russia Capped ETF (ERUS) and distribute assets to shareholders who were left holding the bag when Russia ETFs stopped trading following the invasion of Ukraine.
“The Board of Directors of iShares, Inc. has approved the liquidation of the Fund. An initial liquidation distribution is currently scheduled to be sent to shareholders on or around August 17, 2022,” according to iShares.
The iShares MSCI Russia Capped ETF previously suspended new creations of ERUS shares on March 1 and stopped trading altogether on March 4 after western sanctions on Moscow in response to the invasion of Ukraine made it all but impossible to access Russian financial markets.
According to a BlackRock note, Russia’s invasion of Ukraine has triggered a range of sanctions and other capital controls that impeded BlackRock and other non-Russian investors from accessing Russian markets. Consequently, ERUS’s current holdings of Russian equity securities cannot immediately be liquidated and distributed back to investors — ETFs hold a basket of underlying assets, or in this case, the difficult to access Russian equity market.
Consequently, BlackRock warned that the full liquidation process of the fund will take an unknown period of time.
The iShares MSCI Russia Capped ETF will not officially close down until at least December 31, 2023, so the ETF will remain in a kind of limbo as the fund provider continues to liquidate its holdings of securities and depositary receipts.
“It seems like a very fair way to wind down the fund,” Steve Sosnick, chief strategist at Interactive Brokers, told Bloomberg. “They’ll distribute what they can now and leave open the opportunity that sometime in the next year and a half, if there’s an opportunity for them to actually realize some value from their holdings, they’ll pass those along.”
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