Montana pulled $14M of investments tied to Russian interests

The State of Montana has dumped nearly all of its assets tied to Russian interests, some $14 million, Board of Investments Executive Director Dan Villa told lawmakers this week.

In March, Gov. Greg Gianforte called for Montana to divest from assets in Russia after the invasion of Ukraine. Now, just $35,000 remains in Russia because of the government’s restrictions on rubles, Villa said.

“We began exiting the Russian holdings when we could, not because of any, what I’ll call governance or policy reasons, but because Russia is uninvestable as a country at this point,” Villa said. “It’s been removed from the indices.”

He offered the update Thursday to the State Administration and Veterans’ Affairs Interim Committee in response to a question from Rep. Kelly Kortum, D-Bozeman. In a call after the meeting, Kortum said he had asked about the divestment in May and Villa had said progress was slow, but Kortum didn’t receive numbers at the time.

“When I heard the numbers (Thursday), I was pretty thrilled with them,” Kortum said.

In March, many state government and industry leaders in the U.S. announced plans to pull investments from Russia shortly after President Vladimir Putin invaded Ukraine, but not all succeeded. For example, California lawmakers tried to pull pension funds out of Russia, but the Sacramento Bee reported late last month that pensions were thorny to sell, all those holdings in Russia remained, and values had plummeted. 

In a March 2 memo, Montana’s Republican governor formally requested state agencies withdraw any investments aiding Russia’s invasion of Ukraine and its “vicious war machine.” The memo noted the state had identified some $15 million tied to Russia and had already started to divest: “Montana stands with Ukraine.”

In other updates to the committee Thursday, Villa also noted the state has been able to expand opportunities for how local governments use bonds. He said the change came about after a couple of years of work to remove private activity restrictions on nontaxable bonds, and he offered one example of the result.

“Previously, we wouldn’t have been able to help local governments or school districts build housing, but at our last board meeting, we’re now financing the construction of teacher houses in West Yellowstone,” Villa said.

He noted returns were down in fiscal year 2022 for three of the state’s four investment pools, but he also noted markets have generally been down, with the S&P 500 dropping 12.39 percent the same year. At the same time, Villa said the state’s strategy to diversify helps curb losses.

“It really speaks to why diversification is necessary within a pool of this size,” Villa said. “Some folks may be interested in more or less equity exposure, but when you’re getting about 23 percent, nearly 24 percent return on your real estate portfolio, that helps smooth some of your losses that will inevitably happen in up and down cycles within the domestic equity and international equity markets.”