California Pension Fund Invests in Russia’s Sovereign Debt

The biggest U.S. pension fund, the California Public Employees’ Retirement System (CalPERS), has increased its investments in Russian sovereign debt by 8% over the last year up to $460 million, documents obtained by Bloomberg reveal. This makes the fund the 10th biggest foreign investor in Russian government bonds among those who disclose such data, the report says.

The increase in investments is happening amid growing tensions between Washington and Moscow and threats of tougher sanctions. A bipartisan group of U.S. senators has presented a bill targeting Russian sovereign debt in August 2018 over Moscow’s alleged interference in the 2016 presidential elections.

The bill, also stipulating restrictions on transactions with top state banks, including the ban on correspondent accounts, asset bans on big energy like Gazprom and Rosneft, as well as military companies, is currently being reviewed in the U.S. Congress and could threaten several major American investors if it passes.

If the legislation passes, Secretary of State Mike Pompeo will have to determine if Russia may be designated as a “state sponsor of terrorism” and thus eligible for a new set of sanctions.

CalPERS’ spokeswoman Megan White, cited by the media, said that the fund’s investments “follow federal and state laws” and are made in compliance “with directives from the CalPERS board.”

In an interview with Bloomberg, London-based senior strategist at Union Bancaire Privee Koon Chow noted that the fund, as well as other investors, may press the Congress to drop the sanctions against Russian government bonds. At the same time, he expressed doubt that they would succeed.