The collapse last month of Russia's banking system and financial markets left pension funds with only small investment losses.
That's because those investing in Russia do so mainly through emerging markets portfolios that have limited exposure to Russia.
Pension fund executives interviewed by Pensions & Investments said their funds had no more than $40 million each invested in Russia -- a drop in the bucket for these multibillion-dollar asset pools. Chase Manhattan Corp. and Citicorp each said at the start of the month they would take losses from Russia of $200 million. And German and U.S. banks could ultimately be saddled with unpaid loans worth an estimated $37.3 billion.
Ken Menke, senior equity manager at the Florida State Board of Administration, said the fund's $786 million active and passive emerging markets portfolios contained only $15 million in Russian investments as of June 30.
The $76.9 billion New York State Teachers' Retirement System, Albany, had $9 million invested in Russia as part of $434.5 million run by Putnam Asset Management in international fixed income as of July 31, said Candace Ronesi, spokeswoman.
The $10 billion San Francisco City & County Employees' Retirement System has about $40 million invested in Russia through its $200 million commitment to Grantham, Mayo, Van Otterloo & Co. LLC's emerging market debt fund, said Dick Piket, senior investment officer, fixed income.
The Boston-based Grantham Mayo fund had "fantastic returns the first year," Mr. Piket said. For the year ended March 31, the fund returned 33.22%.
But the investment faltered. For the year and quarter ended June 30, returns slipped to 3% and -11%, respectively. And that's before Russia's August economic crisis.
The Morgan Stanley Capital International Russia index lost 83.2% of its value for the year as of Sept. 1.
As of Aug. 31, the MSCI Emerging Market index had dropped 40% since Dec. 31. Russia makes up 1.44% of that index.
George Russell, chairman of Frank Russell Co., Tacoma, Wash., has been an advocate since 1991 of Western investment in Russia.
Said Mr. Russell: "There are two types of investment approaches to Russia, those in it for the long term or short term." Long-term investors were in the private equity markets, he said, while short-term investors, played the Russian stock market.
Russia "is going down the road to a free market with plenty of potholes," he said.
Mr. Russell estimated that the Russell 20-20 group, a coalition of pension executives and investment managers he heads, has invested $24 billion in Eastern Europe, the CIS countries, China and India since the end of the Cold War in 1991. He said he could not provide statistics solely on Russia.
But Gilman Gunn, chief investment officer of Evergreen Funds, Boston, sees little opportunity there.
"The normal kinds of safeguards we're looking for in emerging markets were not present" when he visited Russia close to a year ago, Mr. Gunn said.
Mr. Gunn said he was in Russia performing due diligence for possible investment for Evergreen's mutual funds. He "visited companies as well as people in government. We couldn't get accounting information," he said. It was common for a company to record bartered goods as revenue, and workers and managers were at odds with shareholders.
The Evergreen international growth fund has no exposure to Russia, he said.
And how will Russia's downfall affect other world markets, thus widening the exposure of U.S. institutional investors?
"The direct effects are small, but the indirect effects are much larger," said Adrian James, director and portfolio manager for Rogge Global Partners Inc., London, a global bond firm.
Mr. James would not specify Rogge's exposure to Russia, saying only that its exposure to emerging markets was "limited."