5 minute read
Markets and economy

Russian sanctions, index changes, and Vanguard funds

5 minute read
  •  
March 09, 2022
Markets and economy
Market volatility
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As governments around the world impose sanctions on Russian financial institutions, companies, and individuals in response to the country’s invasion of Ukraine, our clients naturally have questions about the Russian exposure of Vanguard funds.

First and foremost, Vanguard has suspended purchases of Russian securities across our actively managed funds and is working to further reduce our exposure to Russia and exit the positions across our index funds. And, of course, Vanguard funds will continue to adhere to sanctions.

Overall, the exposure of Vanguard funds to Russian assets is extremely limited, with Russian securities accounting for less than 0.01% of client assets.1

Russia’s removal from market indexes

At least five major sponsors of market indexes have announced in recent days that they will drop Russia from various equity and fixed income indexes in a matter of days or weeks. Other index sponsors may follow. Although some index sponsors may continue to track the performance of Russian securities in standalone-country indexes, Vanguard index funds track more broadly diversified indexes and, as a result, will no longer provide exposure to Russian securities.

How Vanguard prices securities that are not trading actively

Because market quotes for Russian securities may not be readily available, Vanguard’s internal pricing review committee will use a variety of observable market indicators to adjust these securities’ value appropriately. The net asset value, or share price, of our mutual funds and ETFs will reflect these fair-value pricing adjustments. When fair-value pricing is employed, the prices of securities used by a fund to calculate its net asset value may differ from quoted or published prices for the same securities.

How Vanguard is responding to sanctions on Russia

An enterprise-wide team tracks, analyzes, and responds to the latest sanctions and government orders affecting Russia, assesses market conditions, and develops solutions to operational challenges. The team also is in regular contact with industry partners. As Vanguard applies government-imposed sanctions, it continues to ensure that client assets are stewarded effectively during this period of uncertainty and market volatility.

Vanguard published an earlier version of this article on March 3, 2022.

1Note that the holdings of most Vanguard funds as of the end of every month are updated on our websites around the middle of the following month. An exception applies to certain of our exchange-traded funds (ETFs), which disclose their holdings daily.

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For more information about Vanguard funds or ETFs, visit vanguard.com to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information are contained in the prospectus; read and consider it carefully before investing.

Vanguard ETF Shares are not redeemable with the issuing fund other than in very large aggregations worth millions of dollars. Instead, investors must buy and sell Vanguard ETF Shares in the secondary market and hold those shares in a brokerage account. In doing so, the investor may incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling.

All investing is subject to risk, including the possible loss of the money you invest.

Investments in securities issued by foreign companies and governments are subject to risks including country/regional risk and currency risk. These risks are especially high in emerging markets.

Bond funds are subject to the risk that an issuer will fail to make payments on time, and that bond prices will decline because of rising interest rates or negative perceptions of an issuer's ability to make payments.