Investment bank traders are renowned more for their pragmatic opportunism than their moral compass. So it is a measure of President Vladimir Putin’s pariah status that none of the big Wall Street names appears to be risking their reputation buying up out-of-fashion Russian assets as they are dumped by mainstream investors.
Unless you think that all Russian companies and the Russian state will cease to exist in the coming months, the price of many shares and bonds, trading at 10, 20 or 30 per cent of their prewar levels or face value, screams “bargain”. And yet, Wall Street’s distressed-asset desks have been shunning them.
Just as western businesses have rushed to leave Russia, so many investors in Russian companies have been desperate to ditch their exposures. Trading volumes in the country’s corporate bonds have nearly tripled over the past month, as mainstream investors rush for the exit.
Under instruction from the Norwegian government, Norway’s sovereign wealth fund has frozen all new investment in Russia, and will begin to divest its $3bn of investments in the country. Abrdn, the UK asset manager with an emerging markets specialism, has begun selling its Russian assets too, according to insiders. This week, JPMorgan Chase will remove Russian bonds from its emerging markets indices.
The sales so far are just a trickle in relative terms, though. One top Wall Street executive said only 3 or 4 per cent of the $50bn of assets that could be sold had so far traded, despite the bulk having been written down to zero on investors’ books.
If some of the usual-suspect distressed buyers are staying away, realpolitik is playing at least as big a role as ethics: shareholder pressure and financial pragmatism have supplemented murderous geopolitics to make a powerful cocktail of deterrence.
“A lot of investors are self-sanctioning,” said Professor Florin Vasvari at London Business School. “Settlement [of bond sales or coupon payments] is very…