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Kentucky teachers' retirement system lost millions in Russian bank stock — and narrowly avoided losing way more

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Peter Santini/Bloomberg via Getty Images

Kentucky teachers' pensions were rumored to be on somewhat shaky ground this week after a report circulated online alleging the state pension system remained a major shareholder in a tanking Russian bank stock.

What allegedly happened?

Russia's largest lender, Sberbank of Russia, cratered 95% on the London stock exchange Monday upon announcing it would be pulling out of the European market. News of the stock free fall turned up an interesting note: as of Dec. 30, 2021, the Kentucky Teachers Retirement System was listed as the bank's second-largest U.S. institutional shareholder.

In a tweet posted Thursday night, the Twitter account "Market Sentiment" claimed that as a result of Sberbank's collapse, the teachers' pension system suffered a concurrent 95% loss in its position, amounting to more than $12 million.

Kentucky Rep. Thomas Massie picked up on the tweet and remarked, "It's obviously part of a much larger portfolio, but still unfortunate and notable." Later he added, "Buy the ticket, take the ride."

The pension system sets the record straight

But on Friday, one of the Kentucky Teachers Retirement System's lawyers shut down the rumors, claiming them to be "completely false."

Beau Barnes, TRS' general counsel, said in a statement that TRS sold off its direct investments on Feb. 23, one day before Russia launched its invasion of Ukraine.

The sell-off resulted in the pension system losing $3.2 million of its initial $15.6 million investment, Barnes acknowledged.

"TRS’s holding was in an over-the-counter, American-exchange portion of Sberbank known as an American depositary receipt. This is a small piece of the overall Sberbank capital structure," Barnes clarified against the implication that TRS's holdings accounted for a sizable ownership of the massive Russian bank.

The lawyer went on to further calm any hysteria by noting that TRS' previous holdings in Sberbank and its "remaining exposure to holdings in Russia is proportionately negligible in a portfolio of about $26 billion."

According to the Lousiville Courier-Journal, he previously disclosed that approximately $30 million — or about 0.12% — of the pension system's $26 billion investment portfolio was in Russian investments.

Anything else?

Several other states have recently begun withdrawing Russian assets amid the country's unprovoked attack on Ukraine, especially as sanctions levied by the U.S. and its Western allies begin to take effect, crippling the Russian economy.

"I strongly encourage divestment from all Russian holdings," said Kentucky Treasurer Allison Ball in a statement, according to WSIL-TV. "Outside fund managers who maintain indirect holdings of pension funds should proceed with divestment from Russia. Any individual holdings of pension funds should also be divested through best efforts as soon as possible."

"The world has been inspired by Ukraine’s heroic fight for freedom, and Kentucky is committed to doing its part to support U.S. sanctions against Russia to stand alongside the sovereign nation of Ukraine," Ball added.

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