Georgia’s State Pension Funds Lose $150 Million in Russia Investments

Illustration by Brittney Phan

Key Points
  • Gov. Brian Kemp and House Speaker David Ralston called for divestment from Russian stocks following that country’s invasion of Ukraine.
  • The value of Georgia’s Russia-related investments dropped 99.73% by the time they were sold off.
  • The loss raises questions over what assets are in the portfolio.

Georgia state officials this month quietly shed more than $150 million in Russian assets from the state’s pension systems, as scrutiny over U.S. states’ investments mounted amid Russia’s full-scale invasion of Ukraine.

Georgia’s two state-run pension systems, which pay out retirement benefits to teachers and state employees, were invested in $158.4 million in Russian assets through a U.S.-based private fund, records obtained by State Affairs show. 

The Employees Retirement System of Georgia (ERSGA) and the Teachers Retirement System (TRS) held  $132 million and $26.4 million, respectively, in the Blackrock-managed iShares MSCI Russia ETF (ERUS) as of June 30, 2021, the most recent publicly available financial data. 

By the time Russia’s invasion began, on February 24, the fund had lost half its value. Gov. Brian Kemp and House Speaker David Ralston (R-Blue Ridge) called for the state to divest on February 28, by which time the fund lost some 80% of its worth. By the time the state sold its position on March 3, the fund’s value dropped 99.73%. 

“There's no doubt that every state retirement system across the country is going to have to now think a little bit more carefully about the nature of what geopolitical sanctions could look like. Given the way that we've seen the West, the U.S., and Europe, operate and respond fairly cohesively in reaction to Russia,” said Anthony Randazzo, executive director of the Equable Institute, a bipartisan nonprofit that focuses on pension policy and advocates for sustainable and accountable pension systems. “It wouldn't surprise me if (the legislature) decided to weigh in further and add some more specific constraints on how (pensions) can invest in a foreign business.”

The loss won’t impact retirees’ pension benefits from being paid out, but it’s still a costly mistake that could have been avoided, according to experts. 

The fund, which consisted mainly of equities in Russian energy, mineral and financial companies, such as Gazprom, Lukoil and Sberbank, is the only asset identified for divestment by the House Budget Research office. According to records obtained by State Affairs, both pension systems opened their positions in the fund in November 2010. The fund suspended trading on March 4, the day after officials said Georgia’s investments were closed out.

Questions and records requests to TRS and ERSGA for details on the divestment transaction, that would precisely show the extent of the state’s losses, were denied citing a statute that delays the release of specific investment information for nearly half a year. Officials did not return requests to interview members of ERSGA and TRS leadership for this story.

Protesters in downtown Atlanta rally against Russia's invasion of Ukraine on Feb. 26, 2022. (Credit: Jeff Breedlove)

Verdaillia Turner, president of the Georgia Federation of Teachers, said that historically, teachers have called for more fiscally conservative approaches to investing the teachers’ pension funds, which is made up of contributions from teachers’ salaries and taxpayer money from school districts. ERSGA is similarly funded by employee contributions and state agency contributions, which originate from taxpayer funds. 

“Of course, the state can say it is really their money, but we're the ones that earned that money and it is supposed to be set aside and kept safe,” Turner said. Both TRS and ERSGA are part of the state government but they essentially act as independent financial institutions subject to public oversight and regulation.

“Teachers are mostly conservative when it comes to money. If they weren't, they'd be doing something else for a living,” Turner said. 

Experts say pensioners should not worry because both systems have billions in assets and even the loss of hundreds of millions of dollars represents a fraction of a percentage of the overall investment.

Still, $158 million is a sum larger than the annual budgets of many state agencies, roughly equivalent to the combined budgets of the Georgia National Guard and Secretary of State’s office, or enough money to pay over 2,000 teacher salaries. 

Georgia is not alone in its move to divest from Russian assets. California had $1 billion tied up in Russian securities and Ohio shed some $300 million in Russian assets, according to officials in those states. Colorado reportedly divested $7.2 million from a Russian bank in its pension fund. Idaho sold off over $3 million in Russian rubles, the country’s currency. 

At issue for Turner: Teachers are so occupied with the demands of their job that they aren’t thinking about whether the TRS is making wise investment decisions, she said. 

“Teachers aren't saying anything because teachers aren't really aware of their Teacher Retirement System,” Turner added. “Most teachers don't even know what's going on. What they’re trying to do is get retired, if they can get to that point, and that's problematic for us.” 

And it’s not just teachers. David Yost, the attorney general of Ohio, told Fox Business last week that the state “had to go looking” into what investments the state’s pension system had in Russia because  “we didn’t know.”  

Randazzo, of the Equable Institute, said that generally speaking, both ERSGA and TRS have limited exposure in risky assets when compared nationally to other state pension funds. 

“Georgia’s pension funds are outliers nationally in that they have very little investment in alternative classes like hedge funds, private equity, or real estate,” he said. “There are strict legislative limits on what asset classes the investment managers at both of those funds can utilize.”

Experts point to the fact that pension systems are long-term investments and, therefore,  if TRS and ERSGA have significant exposure to losses and gains in the stock market, “large swings from year to year should not be overly analyzed,” according to Randazzo. “Last year had great returns, this year will have poor returns. What matters is the average performance over time.” 

Records show that from 2016 to 2021, TRS investments grew 130% from $43 billion to $99.1 billion.

Protesters in downtown Atlanta rally against Russia's invasion of Ukraine on Feb. 26, 2022. (Credit: Jeff Breedlove)

Meanwhile, Russia’s invasion of Ukraine, beyond collapsing any investments in Russia, has caused market shocks the world over as many multinational corporations have exposure in Russia, whether it’s Coca-Cola or fast food franchises or energy companies that partnered with Russian counterparts. 

French automaker Renault, for example, which both ERSGA and TRS are invested in, owns the controlling stake of the Russian automaker that produces the iconic Soviet-era Russian car brand LADA. Many of these equities have seen a downturn, but analysts seem to think they will recover. 

About a quarter of Georgia’s pension funds are invested in international investments. For Randazzo the exposure in Russia was reasonable. 

“In any well-diversified international equities portfolio, it is reasonable to expect a certain exposure to companies in Russia. They have been, until recently, one of the largest economies in the world,” said Randazzo.

“The flipside is, well, the Russians invaded Crimea in 2014,” and U.S. and Western sanctions followed, he continued. “It would have been entirely reasonable in the years after that to step back and say, ‘You know what? Russia could do this again.’”

Whether the geopolitical upheaval caused by Russia’s invasion prompts a larger reassessment of investment strategy remains to be seen. Currently, state pension funds are significantly invested in China, which many find controversial because of that country’s human rights record. 

“I think what's going to happen right now is people are gonna sit back and they're gonna say, ‘Alright, what's the risk of future sanctions on China?’ Either it could be anything from China and continuing its relationship with Russia, providing military aid, to something as specific as what was happening with Huawei last year,” Randazzo said. 

In February, the Georgia Senate passed a bill that would ban companies owned and operated by the Chinese government from bidding on state contracts, but it did not address state investment in Chinese companies. 

Senate Bill 562 bans any future investments or contracts with Russian and Belorussian companies. It has passed the Senate and is now before the House. 

Kyle Wingfield, president of the Georgia Public Policy Foundation, said this “new phase of geopolitics” will cause pension funds and other investors to rethink geopolitical risk. 

“We're gonna see more of this kind of risk than less,” he said.

While for some observers Russia’s invasion of Ukraine came as no surprise, that doesn’t appear to have been the case for many institutional investors.

“It still stands that we all saw the Russian invasion potentially coming for months,” Randazzo said. “I know that I was chatting about it with my family around Christmas time.”


Should Georgia’s retirement systems adopt policies to safeguard against geopolitical risk? What are your thoughts on the state’s past investments in Russian assets? Write to: [email protected] or reach out on Twitter @alemzs