Liontrust suspended dealing in the Russia Fund on 25 February 2022 because it was decided this was in the best interests of investors following the Russian invasion of Ukraine and the sanctions imposed on and by Russia as a result. Since that date, investors have not been able to make purchases in or redemptions from the Fund.
You can find out more details by downloading the client letter or statement on waiving fees using the links below or reading answers to the most common questions we have been asked by investors:
Client suspension letter >
Statement on waiving fees >
Fund price >
Q&A on suspension of Russia Fund
Why have you suspended dealing in the Russia Fund and is this common practice?
Liontrust did not take this action lightly and we appreciate this is disappointing for you as an investor. We want to assure you that we explored every alternative option possible to avoid a suspension of dealing in the Fund. In the end, Liontrust decided that suspending dealing was in the best interests of all investors given the exceptional circumstances in terms of the Russian invasion of Ukraine and the sanctions imposed on and by Russia as a result.
The ban on ‘unfriendly’ foreign investors (those from countries who have imposed sanctions on Russia) trading in local Russian securities continues to prevent the Fund from trading normally in its underlying investments, and it is not clear how long this will last.
Who has made the decision temporarily to suspend dealing?
The decision was made by Liontrust in agreement with the Fund’s Depositary, Bank of New York, who have oversight responsibilities to ensure Liontrust acts in its investors’ best interests and safeguards their assets, and with the knowledge of our regulator, the Financial Conduct Authority (FCA). Liontrust regularly reviews the suspended status of the Fund with our Depositary and provides updates to the regulator.
How long is dealing in the Fund likely to be suspended?
We appreciate the ongoing suspension of the Fund is incredibly frustrating for investors and we regularly explore whether there are any other options open to Liontrust and the Fund. We will ensure that the suspension only continues for as long as it is justified to meet the best interests of all investors in the Fund. At the moment, we are not able to tell you for how long dealing in the Russia Fund will be suspended. We will keep investors updated through this page.
Does the suspension mean I can’t buy or sell my holding in the Fund?
Yes - we have suspended both purchases and sales in the Fund. Investors’ ability to redeem from the Fund and when this might happen are dependent on the outcome of the current conflict, the lifting of sanctions on and by Russia and the ending of capital controls.
Does it matter whether the fund is held within an ISA?
No, the suspension in dealing applies to all investors.
Why can’t the Fund re-open if there is trading on the Moscow Stock Exchange?
The Moscow Stock Exchange reopened on 24 March 2022 after a period of suspension. Trading was initially restricted to only local Russian investors. Trading for 'friendly' foreign investors (those from countries who have not imposed sanctions on Russia) resumed in August 2022, however, investors from 'unfriendly' countries are still unable to trade.
Due to the strict capital controls restricting money moving out of Russia, as well as extensive sanctions against Russian companies, it has not been possible to end the suspension of the Liontrust Russia Fund. For this to happen, we need the Stock Exchange to be fully reopened to all investors and for the removal of capital controls, although these may not be the only factors required to unsuspend the Fund.
What are you doing to raise cash, what target are you aiming for and how long will this take?
We have explored all steps to try and raise cash and unfortunately are not able to do so in the current circumstances. When the suspensions and sanctions are lifted, the expectation is that the Fund should be able to reopen promptly and any purchases and sales can continue as expected.
The Fund is due dividends from the Russian companies in the portfolio and these would be held in a local custody account in Moscow. Due to sanctions and the local restrictions this cash cannot be transferred out of Russia and may never be received. The value of these accrued dividends and balances are not recognised in the net asset value (NAV) of the Fund. No interest is receivable on the bank account. Nor can the Fund invest this cash or actively manage the Russian assets. If the situation changes and the balances become available to the Fund to either invest or transfer to the UK then they will be treated as windfall at the time of receipt.
A number of ADRs (American Depository Receipts)/GDRs (Global Depository Receipts) in Russian stock have been unwound to transfer the shares to the Moscow stock exchange in the past few months. The Fund has looked to exit these positions prior to transfer to aim to ensure no more assets of the Fund become subject to sanctions and controls. There were seven ADR/GDRs held by the Fund as at 31 December 2023, and the Fund has managed to sell four of the ADR/GDR positions since then.
How are you currently valuing the Russia fund?
Where possible, the price is calculated at 12pm every day and released during the afternoon. The price of the Fund shown is indicative and for reference purposes only. We are showing prices in our Interactive Fund Centre.
Liontrust has reviewed the best way to value the underlying assets and therefore the Fund given the extraordinary situation we face and the fact we do not know for how long the Fund will need to be suspended.
As a result of the latest annual review of the valuation of the assets of the Fund, which was conducted in conjunction with the independent auditors of the Fund, it has been decided to increase the discount on the valuation of the underlying assets of the Fund from April 2024. We will now explain why we came to this decision.
Before doing so, however, it is important to highlight that the discount applied to the value of the assets of the Fund is a best estimate at this stage given that not all the underlying assets are tradeable and many of the Fund’s investments are subject to manual valuation adjustments. We cannot know what price we will receive for them when the suspension is eventually lifted.
The Fund currently holds a combination of 18 equity holdings and cash. While some of the Fund’s equity holdings are actively traded on the Moscow Stock Exchange and prices are available, foreign investors have no access to this market. Therefore, an adjustment needs to be made to the available price to reflect that these equity holdings are not tradeable by foreign investors.
In April 2024, the valuation approach was reviewed in conjunction with the independent auditors of the Fund to take account of recent volatility, which resulted in an increase in the discount applied to the equity holding of the Fund. This led to the Fund's price decreasing by 13% at the end of April as the new valuation approach was introduced. The valuation approach was based around the following three scenarios:
Base Case Scenario
The war in the Ukraine continues for a number of years and it will be five years before sanctions are lifted and trading resumes for unfriendly countries.
Best Case Scenario
The war in the Ukraine is resolved shortly, sanctions are lifted and trading resumes in one year.
Worst Case Scenario
The Russian state nationalises all companies and the value of a local company is priced at zero.
The new valuation approach of the Fund is being based on a blend of the three scenarios above using financial modelling.
Are you still charging a fee for the Fund?
No – Liontrust is continuing to waive all charges investors pay for the Russia Fund while it is suspended. This means that holders of the Russia Fund will not pay the Ongoing Charges Figure (OCF), which includes the Annual Management Charge (AMC) and Administration Fee, for any of the share classes in the Russia Fund until dealing is resumed. We believe this is the right decision while shareholders cannot make purchases and redemptions in the Fund.
What are your short-term expectations for the fund?
We will continue to manage the Fund as best as possible given the current constraints.
Who to contact for further information?
If you have any questions, please contact us on 020 7412 1700 or email LionTA@liontrust.co.uk.
As at 20 May 2024.
