Earlier this month, Governor Jim Justice called an emergency meeting of the state’s Investment Management Board (WVIMB) to consider divesting from Russian-backed securities.
“We continue to witness unspeakable human atrocities being committed by the Russian government against the people of Ukraine, and even though this action may seem small, everything we can do to help is worth it,” Justice said.
Morally, Justice sent the correct message, and other states are also trying to pull out of Russian investments. But practically, that is not as easy as it sounds.
The IMB manages approximately $25 billion. About $20 billion of that is state and municipal pension funds. The Russian company investments total $105 million, or just 0.2 percent.
Or at least they did.
The value of the Russian stocks and bonds cratered after the Ukraine invasion. For example, West Virginia holds stock in the Russian energy giant Lukoil. Its share price has dropped from $90 a month ago to just under $7.
The Russian stock market is gradually reopening after being shut down for a month. The U.S. and European allies have imposed sanctions that limit Russian investments. The Russians are also restricting trading.
In short, it is difficult, if not impossible, to sell Russian securities right now. Even if you could, there are no buyers. Technically, West Virginia’s Russian investments have not dropped to zero, but if you cannot sell a stock or bond then it has no value.
There is one other hitch for the WVIMB.
The Board has a fiduciary duty to manage the fund in the best interests of the beneficiaries. Shedding investments to make a statement in support of a free nation under attack may be meritorious, but it can also be a slippery slope for an agency that is required by law to protect the financial future of retirees.
Instead, Thursday the Board passed a resolution critical of the Russian invasion with a pledge to divest Russian-related investments when it is fiscally responsible. Craig Slaughter, CEO/executive director of the Investment Management Board, said the Board stands with Ukraine and will get rid of the Russian securities when possible.
“We all stand with Ukraine and will do everything we can to support them,” Slaughter said. “What he (Putin) has done is criminal and abhorrent,” Slaughter told me. “We’ll keep a very close eye on the Russian market and try to move whatever we can.”
Right now, the $105 million in Russian investments by West Virginia is an unrealized loss. There is no actual loss until the stocks and bonds are sold for less than the state paid for them. In the future, West Virginia will be able to make a more meaningful stand against Russian aggression—that will be the right thing to do—but it will come at a price.