Specialist in Asia Pacific, Japan, China, India and South East Asia and Global Emerging Market equities.

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formerly Realindex Investments

Leader in active quantitative equities across Australian equities, global equities, emerging markets and global small companies.

Backed by a unique blend of research, portfolio construction and risk management, focused on uncovering original insights and translating them into investment strategies that are active and systematic, aiming to generate alpha.

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The Russian invasion of Ukraine

Sanctions, market closures and their impact on indices and portfolios

Note: The Russian-Ukraine conflict has created significant turmoil in financial markets, and significant changes happen daily (or even hourly). We have written this note to do our best to communicate to clients what we believe to be important issues around what has happened and what we plan to do. At the time of writing (8th March 2022), we believe the information here to be right, but of course change can and probably will happen swiftly.


On the 24th of February 2022, Russia invaded Ukraine. This has led to numerous sanctions being imposed upon the Russian regime by the international community. Sanctions are typically issued by governments targeting individuals, corporations or governments in order to force their compliance with laws, condemnation of actions or threats to peace. Sanctions usually take a diplomatic or economic form and aim to provide incentive for the target to change their course of action. Previous forms of sanctions include the US Government sanctioning Chinese military companies in response to perceived national security threats1, and the European Union sanctioning individuals from Russia, Myanmar and Syria in response to terrorism and human rights infringements in those countries2.

The current round of Russian sanctions have primarily focused on damaging the Russian economy through asset freezes and restricting Russian access to the global banking system. The imposition of these sanctions have led to:

  • Restrictions on the financing of Russian projects and withdrawal of foreign capital
  • Increased costs of doing business in Russia due to the expulsion of several Russian banks from SWIFT, Mastercard and Visa payment networks3
  • Numerous corporations withdrawing their business operations from Russia
  • Freezing of overseas assets owned by Russians
  • Restrictions on trade conducted with Russia
  • Halting of the Nord Stream 2 gas pipeline

On top of government sanctions, we have also witnessed companies behaving proactively. For instance, Shell, ExxonMobil and BP have all announced their divestment and exit from all Russian oil and gas assets4.

Although existing sanctions have targeted a significant proportion of the Russian economy, they have largely avoided the energy sector due to Europe’s dependency on Russian supplies. There is still the possibility of future sanctions that target the oil and gas trade from Russia which would have a significant impact on global oil prices and a very direct effect on the Russian economy5.


Important information

This material has been prepared and issued by First Sentier Investors (Australia) IM Ltd (ABN 89 114 194 311, AFSL 289017) (FSI AIM, Realindex), which forms part of First Sentier Investors, a global asset management business. First Sentier Investors is ultimately owned by Mitsubishi UFJ Financial Group, Inc (MUFG), a global financial group. A copy of the Financial Services Guide for FSI AIM is available from First Sentier Investors on its website.

This material is directed at persons who are ‘wholesale clients’ (as defined under the Corporations Act 2001 (Cth) (Corporations Act)) and has not been prepared for and is not intended for persons who are ‘retail clients’ (as defined under the Corporations Act). This material contains general information only. It is not intended to provide you with financial product advice and does not take into account your objectives, financial situation or needs. Before making an investment decision you should consider, with a financial advisor, whether this information is appropriate in light of your investment needs, objectives and financial situation.

The product disclosure statement (PDS) or Information Memorandum (IM) (as applicable) for the Realindex funds, issued by Colonial First State Investments Limited (ABN 98 002 348 352, AFSL 232468) (CFSIL), should be considered before deciding whether to acquire or hold units in the Fund(s). The PDS or IM are available from First Sentier Investors.

MUFG, Realindex, their respective affiliates and any service provider to the Fund do not guarantee the performance of the Fund or the repayment of capital by the Fund. Investments in the Fund are not deposits or other liabilities of MUFG, Realindex, their respective affiliates or any service providers to the Fund and investment-type products are subject to investment risk including loss of income and capital invested.

Any opinions expressed in this material are the opinions of the individual author at the time of publication only and are subject to change without notice. Such opinions: (i) are not a recommendation to hold, purchase or sell a particular financial product; (ii) may not include all of the information needed to make an investment decision in relation to such a financial product; and (iii) may substantially differ from other individual authors within First Sentier Investors.

To the extent permitted by law, no liability is accepted by MUFG, Realindex nor their affiliates for any loss or damage as a result of any reliance on this material. This material contains, or is based upon, information that Realindex believes to be accurate and reliable, however neither MUFG, Realindex nor their respective affiliates offer any warranty that it contains no factual errors. No part of this material may be reproduced or transmitted in any form or by any means without the prior written consent of Realindex.

Any performance information has been calculated using exit prices after taking into account all ongoing fees and assuming reinvestment of distributions. No allowance has been made for taxation. Past performance is not indicative of future performance.

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