Abrdn has decided to axe its Eastern Europe-focused fund, which has seen its value plunge by two thirds amid the fallout from the Ukraine crisis.
In a letter to investors, the FTSE 100 fund group said ASI Eastern Europe Equity was no longer commercially viable and would close on 13 September. The fund was suspended at the start of March, after Russia was hit by global sanctions in retaliation for invading Ukraine, making it impossible to dispose of or trade assets.
With stock trading on the Moscow Exchange still suspended, a number of asset managers have also decided to pull their Russia-focused funds, including Jupiter and Invesco.
ASI Eastern Europe Equity was already pint-sized prior to the war in Ukraine after being hit by outflows in recent years. Assets in the fund were £18.4m at the end of January, but by March, this had plummeted to £6m after a number of its assets were deemed illiquid and written down to zero.
Russian equities made up two thirds of the portfolio prior to the suspension, with petroleum company Lukoil and majority-state owned bank Sberbank, its largest holdings at 9.6% and 8.3%, respectively.
Once these assets become tradeable, Abrdn said it would conduct an orderly sale and distribute proceeds on a pro rata basis to all shareholders who were invested in the fund at the time of suspension.
“Small funds face a number of operating difficulties as they are unable to benefit from economies of scale, which can create problems when buying and selling assets at a reasonable price. This can lead to compromised investment performance and proportionally higher costs, to the detriment of shareholder value,” an Abrdn spokesperson said.
“We have continually assessed market conditions and after carefully exploring all possibilities to keep the fund open, we have concluded that it is in the best interest of all shareholders to close the fund. All underlying assets will be sold where possible, allowing for market restrictions and/or sanctions, and the available proceeds will be returned to investors at the closure date.”
ASI Eastern Europe Equity is the latest fund in Abrdn’s product range to be liquidated this year, as chief executive Stephen Bird looks to streamline its product range. Its Emerging Markets Bond and Short Duration Credit funds were given the boot in quick succession.
Ten Abrdn funds were found not to be delivering for investors in its third assessment of value report. More recently it decided to merge its European and UK equities desk, leading to a string of investment team departures.
See also: FCA mulls ‘side pocket’ solution for retail funds with illiquid Russian assets