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Temporary suspension in dealing of the Liontrust Russia Fund

Liontrust has decided to suspend dealing in the Russia Fund. This means investors are not able to make purchases or redemptions in the Fund until further notice. You can find out more details by downloading the client letter or statement on waiving fees using the links below:

Client suspension letter > 
Statement on waiving fees >
Fund price >

Q&A on suspension of Russia Fund

Latest updates on the suspension of Russia Fund

 

Can the Fund reopen now there is trading on the Russia Stock Exchange?

After being closed for nearly a month, the Russian Stock Exchange reopened on 24 March. Trading has been restricted to only local Russian investors, however, and there are currently strict capital controls in place which would restrict us from moving any proceeds from the sale of locally traded stocks to the UK. Also, the GDRs and ADRs we hold that trade in London and New York remain suspended. Therefore, it has not been possible to end the suspension of the Liontrust Russia Fund. For this to happen, we need the Stock Exchange to be fully reopened to all investors and for the removal of capital controls, although these may not be the only factors required to unsuspend the Fund. We will keep the suspension under continual review and will update investors when there are further developments.

 

Are you valuing holdings traded on Western stock markets to zero and converting them into the underlying local shares?

Most of our exposure to Russian companies that is traded in western markets is via depositary receipts - Global Depositary Receipts (GDRs) listed in London or American Depositary Receipts (ADRs) listed in New York. A depositary receipt reflects ownership of the underlying shares in a company but allows the company to access investors in capital markets outside of their home country. Most of these depositary receipts are currently suspended. We have not written these down to zero but are valuing them at their last traded prices. We are in the process of converting these holdings into the underlying local shares which are trading in Moscow, as some of these depositary programs will be discontinued and the shares delisted from western markets. This is following a new law passed in Russia which prohibits Russian companies from listing in ‘unfriendly’ countries. As the majority of the portfolio is already held in local Russian shares there is no significant impact on the fund. The local shares that we will receive in exchange for the depositary receipts will be held at our custodian in Russia and we will be able to trade these when the market reopens to foreign investors. This reopening could happen by the end of May but the exact timeframe remains uncertain. While the reopening of the Russian market to foreign investors is clearly a step forward, while capital controls remain in place we will be unable to repatriate any funds to the UK and therefore the fund is likely to remain suspended.

 

 

Background to the suspension of Russia Fund

 

Why are you temporarily suspending dealing in the Russia fund and is this common practice?

Liontrust has not taken this action lightly and we appreciate this is disappointing news for you as an investor. We want to assure you that we explored every alternative option possible to avoid a suspension of dealing in the Fund. In the end, Liontrust decided that suspending dealing was in the best interests of all investors given the exceptional circumstances in terms of the Russian invasion of Ukraine and the sanctions imposed on and by Russia as a result. While Liontrust has been able to continue to price the Fund on a daily basis – which is available on our website here - the closure of the Moscow stock exchange and the ban on foreign investors trading in local Russian securities prevented the Fund from trading normally in its underlying investments, and it was not clear how long this closure and ban would last. Liontrust’s decision to suspend dealing was made with the agreement of the Fund’s Depositary.

 

Who has made the decision temporarily to suspend dealing?

The decision was made by Liontrust in agreement with the depositary and with the knowledge of our regulator, the Financial Conduct Authority (FCA).

 

How long is dealing in the fund likely to be suspended?

At the moment, we are not able to tell you for how long dealing in the Russia Fund will be suspended. Liontrust will keep the suspension under continual review given it is such a rapidly changing situation and we will ensure the suspension only continues for as long as it is justified to meet the interests of all investors. We will update investors with more information as soon as we can. Please revisit this page for updates.

 

With redemptions suspended may unitholders still make investments into the fund? 

We have suspended both purchases and redemptions in the Fund.

 

Will the fund still be valued during the period of suspended redemptions?

Where possible, the price will be calculated at 12pm every day and released during the afternoon. We are showing prices in our Interactive Fund Centre. 

 

How are you currently valuing the Russia fund?

The Liontrust Russia Fund is valued as the sum of its assets minus the sum of its liabilities. In normal circumstances, the value of the assets is cash, subscriptions, income (dividends), outstanding cash for share sales and the value of shares held by the fund based on the prices available on the relevant stock exchange at the valuation point. Liabilities are any outstanding payments for share purchases, tax, transactions costs, fees and outstanding redemptions.

Currently, the shares held by the Fund are suspended and so there are no current prices available for valuation purposes. In these cases, where in the opinion of the ACD the price is unreliable or no recent traded price is available or if no price exists or, if the most recent price available does not reflect the ACD’s best estimate of the value of the security, then the asset will be priced at a value which in the opinion of the ACD, is fair and reasonable. 

Our standard approach to valuing assets where there is a stale or out of date price is to apply a market based adjustment of the last available price. Typically, where there is an issue with obtaining a price on a stock exchange, the futures market remains open and we adjust the last good price by the change in value of the relevant index future. We have taken the same approach for the Russia Fund and are currently valuing the shares based on their last available prices adjusted by the futures movements up to the last available futures price. 

As the markets (both stock and futures) remain closed, we have reviewed this approach. Many funds have taken a decision to value their positions in Russia at zero, however we believe that a zero price does not reflect the true value of these holdings. We are working on implementing a new fair value process that does not rely on the increasingly stale futures market. This will value each asset under a number of potential scenarios and use a probability weighted average to price the position for the valuation. Were the markets to re-open (regardless of whether we would be able or permitted to trade on them) then we will resume the normal valuation process and base our prices upon the latest available price on the market at the valuation point.

In addition, we have updated the valuation to cease accruing for income (dividend payments) and for our Annual management Charges and Administration Fees following suspension as per our previous announcement. 

We will continue to review our approach to ensure it reflects the latest available information and to work with the Administrator and the Fund’s Depositary to produce a valuation for the Fund as accurately as we can based on what we believe are fair and reasonable prices.

 

What will happen if unitholders wish to sell shares in the fund while dealing is suspended?   

It is not possible to make redemptions during the period the Russia Fund is suspended. These will be made when dealing in the Fund resumes.

 

What happens if an investor has placed a request to buy or sell before or during the period of suspension and then asks to withdraw this request?

If the dealing request was made before 12 pm on Friday 25th February, it will have been processed. Any requests made after 12pm on Friday 25th February during the period of suspension will not be accepted and will have to be submitted again when dealing in the Russia Fund resumes.

 

What are you doing to raise liquidity, what target are you aiming for and how long will this take?

We have explored all steps to try and raise liquidity and unfortunately are not able to do so in the current circumstances. When the suspensions and sanctions are lifted, the expectation is that the Fund should be able reopen promptly and any subscriptions and redemptions met.

 

Does it matter whether the fund is held within an ISA?

No, the suspension in dealing applies to all investors.

 

What are your short-term expectations for the fund?

We will continue to manage the Fund as best as possible given the current constraints.

 

Who to contact for further information?

If you have any questions, please contact us on 020 7412 1700.

As at 3 May 2022