DWS will join rivals in terminating its suspended Russia ETF after MSCI said it would discontinue the underlying index from 1 March 2023.
The Xtrackers MSCI Russia Capped Swap UCITS ETF (XMRD) will continue to be suspended until its final index calculation on 16 December and compulsory redemption on 19 December. The ETF will officially delist from the London Stock Exchange, Deutsche Boerse and Borsa Italiana the following day.
Explaining the decision to terminate XMRD, DWS told ETF Stream in a statement: “The index administrator has recently advised that the reference index will be discontinued as of 1 March 2023.
“In addition, the current derivatives invested in by the sub-fund are due to expire and the sub-fund will not be able to renew these derivatives due to applicable sanctions legislation.”
Once ETF shares have been liquidated, proceeds will be passed to the clearing agent, minus costs associated with redeeming the underlying investments.
DWS noted due to the current valuation of XMRD’s index, proceeds passed back to investors “will be zero or close to zero”.
Creations and redemptions of the Russia swap ETF were first suspended on 1 March after the valuation or disposal of its underlying assets was “rendered impracticable” by Russia’s invasion of Ukraine.
Shortly after, rival products such as the Invesco RDX UCITS ETF (RDXS) shut on 21 June because its exposure was based on swaps tracking global depository receipts (GDR) that ceased to exist after Russian federal law 114-FX came into effect, which meant clients “lost all that was invested”.
BlackRock terminated its Russia-exposed ETFs a day before Invesco but is keeping shares of the products on its fund register while it converts their GDRs into underlying shares.
Investors might realise some value from Russian securities once they become tradeable in future, minus the cost of converting the GDRs and subject to liquidity, spreads, international investor access, volume and volatility, BlackRock said previously.
In June, a DWS spokesperson toldETF Stream that because its ETF relies on a swaps-based exposure directly replicating Russian stocks rather than GDRs, there continued to be a reference point for its underlying and “as a result, the ETF can stay open for the time being while continuing to be suspended”.
Once XMRD closes, the Lyxor PEA Russia MSCI Russia IMIM Select GDR UCITS ETF (PRUS), Lyxor MSCI Russia UCITS ETF (RUS) and HSBC MSCI Russia Capped UCITS ETF (HRUD) will be Europe’s remaining Russia ETFs.
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