Copyright © 2022 Albuquerque Journal
SANTA FE – New Mexico will pull back nearly $8 million in investments in Russian stocks and bonds, after the State Investment Council voted 10-0 on Tuesday to divest due to the ongoing Ukraine conflict.
The state’s Russian investments make up just a small fraction of its total $36 billion portfolio – about 0.022% of its total value – and the move to divest could be largely symbolic in nature.
But Gov. Michelle Lujan Grisham, who is the investment council’s chairwoman, and other backers say no state dollars should be invested in the Russian government, at least until the conflict is resolved.
While the Democratic governor missed the Tuesday meeting due to a scheduling conflict, a Lujan Grisham spokeswoman lauded the SIC’s vote.
“The governor has been clear that not one penny of New Mexico funds should go toward furthering Putin’s brutality – New Mexico stands with the Ukrainian people,” said Lujan Grisham spokeswoman Nora Meyers Sackett, referring to Russian President Vladimir Putin.
During Tuesday’s meeting, the SIC’s Chief Investment Officer Vince Smith said most of the state’s investment exposure to Russian companies are in actively managed stocks, with a smaller amount in bonds and passively managed index funds.
With the Russian stock market currently closed due to the fallout of the country’s invasion of Ukraine, he said pinpointing an exact value of the investments is difficult.
“The market is just not there for these securities,” Smith said.
A SIC spokesman said after Tuesday’s meeting, which was conducted remotely by telephone, that the bulk of New Mexico’s investment exposure to Russia comes from one actively managed investment account with stock in Yandex, which is Russia’s largest technology company.
That investment represented nearly $7.3 million of the state’s roughly $7.9 million in investment exposure to Russia as of the start of the Ukraine invasion, said SIC spokesman Charles Wollmann.
While divestment has been rarely used by New Mexico as a tactic to apply pressure on foreign governments and make moral statements, it’s not unprecedented.
In 2007, the SIC voted to divest about $45 million from publicly traded companies doing business with the government of Sudan, which at the time was committing acts of genocide in the Darfur region.
In addition, board members of the state’s teacher retirement system voted in 2020 to divest from two private prison companies amid growing pressure from teachers and immigrant rights groups.
The teacher retirement fund, the Educational Retirement Board, recently reported having $3 million or less in investment holdings in Russian securities. The fund’s board could also discuss divestment next month, though no such proposed action has been added to the ERB’s agenda as of yet, a pension fund official said Tuesday.
The state’s other pension fund, the Public Employees Retirement Association, also has about $3 million in Russian investment holdings as part of its global market index, PERA Executive Director Greg Trujillo said.
He also said the pension fund has been in touch with its investment managers of those holdings regarding potential sanctions.
Divestment decisions can have legal repercussions, as State Investment Council members and pension fund board members are required to prioritize the fund and its beneficiaries – current and future retirees – over outside interests and concerns.
But Wollmann said that fiduciary obligation doesn’t necessarily preclude divestment, especially in cases like Russian securities that could see their valuations drop significantly due to the Ukraine conflict.
“It is something you only undertake in serious situations,” Wollmann said of divestment decisions.
Other states and countries have also pursued divestment from Russian securities due to the conflict in Ukraine, which intensified last month when Russian troops invaded.
The invasion has led to a mass exodus of Ukrainians, widespread destruction and hundreds – if not thousands – of casualties.
In all, the State Investment Council oversees about $36 billion in investments, including four permanent funds.
The largest of the funds – the Land Grant Permanent Fund – gets money from investment gains and taxes and royalties on the oil and natural gas industries, among other sources.
The fund makes annual distributions that help fund public schools around New Mexico.
New Mexico’s sovereign wealth fund, the combination of all permanent funds overseen by the SIC, is the third-largest in the nation and one of the 30 largest in the world.