How can you avoid Russia in your ETF?

Investing in a global ETF gives you indirect exposure to the companies and markets in which the fund invests.

But what if you do not want direct investments in Russian securities?

At a glance: To examine whether an ETF has direct Russian exposure, check the fund's current holdings, geographic allocation and index methodology. Many major international indices removed Russian securities in 2022, but that does not automatically mean every ETF has zero Russian exposure.

The distinction between direct securities holdings and indirect economic links to Russia is particularly important.

Why was Russia removed from many international indices?

Following Russia's invasion of Ukraine in February 2022, several international index providers changed their treatment of Russian securities.

On 2 March 2022, MSCI announced that Russian equities would be reclassified from emerging markets to standalone market status.

The change took effect after market close on 9 March 2022.

The background included extensive restrictions on access to and trading in Russian securities.

MSCI consequently removed Russian securities from its broad global and regional equity indices in which they had previously been included.

This affected many ETFs tracking those indices.

Does that mean all global ETFs exclude Russia?

No.

ETFs follow different indices and investment strategies.

Some funds may also have held Russian securities that subsequently became difficult or impossible to sell.

A fund's historical holdings and current portfolio may therefore differ from the index it tracks.

Russia's removal from a benchmark is not, by itself, evidence that a particular ETF has no Russian holdings.

How to examine Russian exposure in an ETF

1. Find the ETF's official factsheet

Most ETF providers publish a factsheet.

It often includes information about:

• The fund's investment strategy.

• Geographic allocation.

• Largest holdings.

• The index the fund tracks.

If Russia does not appear in the country allocation, that is relevant information.

It is not necessarily sufficient to document zero direct Russian exposure.

2. Check the full holdings list

A factsheet often shows only a selection of holdings.

To examine direct Russian securities in more detail, find the fund's full holdings list, if available.

You can then check whether the fund still has recorded positions in Russian securities.

Be aware that publication may be delayed.

Check the date of the holdings list.

3. Examine the index methodology

If the ETF tracks an index, the index provider's methodology can tell you which markets are included.

MSCI World, for example, covers developed markets and does not include Russia as a local equity market.

A broader index including emerging markets may have a different historical composition.

Index methodologies and market classifications can change. Use the current documentation.

4. Distinguish direct from indirect exposure

This distinction is crucial.

Direct exposure can mean the ETF owns securities classified as Russian or other direct investments linked to Russia.

Indirect economic exposure can arise when companies in the fund have revenue, operations, suppliers or other economic interests in Russia.

An ETF without Russian equities may therefore still hold companies affected economically by developments in Russia.

A standard country allocation does not necessarily document the absence of such indirect links.

Does MSCI World exclude Russia?

Russia is not included as a local equity market in MSCI World, which covers developed markets.

Russian equities are therefore not ordinary constituents of MSCI World.

However, you should still examine the current holdings of a specific ETF tracking the index.

Companies in the index may also have indirect economic links to Russia.

What about an All-World ETF?

All-World indices typically cover developed and emerging markets.

Russian equities were historically included in some broad emerging markets indices.

Several major index providers changed their treatment of Russia after 2022.

Do not use older descriptions of an ETF's geographic coverage as evidence of its current holdings.

Always check the latest published country allocation and holdings list.

What if you also want to exclude China?

China differs from Russia in this context.

Chinese equities remain part of many broad global indices that include emerging markets.

To examine an ETF without direct Chinese equity exposure, check its index, holdings and any exclusion rules.

Distinguish between excluding Chinese securities and excluding every company with economic activities in China.

The latter requires substantially more extensive information.

How can country exclusions be used in an ETF comparison?

Imagine you have chosen these criteria:

• You want exposure to Europe and the US.

• You do not want direct exposure to Russian equities.

• You want at most 50% exposure to one country.

An ETF may meet the criterion of no direct Russian equity exposure while exceeding your single-country concentration limit.

Examine the criteria separately.

In Wizer Invest, geographic preferences and exclusions form part of the criteria-based comparison.

If the necessary data is unavailable, the result should be unknown rather than imply that an exclusion has been documented.

Frequently asked questions

Is Russia included in MSCI World?

No. Russia is not included as a local equity market in MSCI World.

Is Russia included in emerging markets ETFs?

Russian securities were removed from several major international emerging markets indices in 2022. A particular ETF's holdings still need to be checked separately.

Can an ETF without Russian equities still have exposure to Russia?

Yes. Companies in the ETF may have indirect economic links to Russia.

How do you find an ETF without Russia?

Examine the fund's current holdings, country allocation and index methodology. Check what the information actually documents.

Can you exclude both Russia and China?

It depends on the fund's investment strategy and holdings. The two countries need to be examined separately.

---

This article provides general information, rather than personal investment advice. Index rules, sanctions and holdings can change.