Vanguard stopped buying Russian stocks. AmerisourceBergen said it’s still supporting patients in drug trials there

Two big Philadelphia-area companies have taken different paths on their Russia-related businesses this week, as hundreds of firms are pulling business from the country after its invasion of Ukraine.

The fund giant Vanguard, based in Malvern, announced new steps to stop buying Russian stocks. In contrast, a division of pharmaceutical distributor AmerisourceBergen, headquartered in Conshohocken, was continuing operations in Russia as of Tuesday.

Meanwhile, major consumer brands including McDonald’s, Coca-Cola, PepsiCo, and Starbucks all announced business suspensions in Russia on Tuesday.

Vanguard said Monday that it has stopped buying Russian securities for its actively managed funds.

The $8.5 trillion asset manager said its suspension applies “across our internally and externally managed active funds.”

The company is also working to exit positions across Vanguard index funds, according to a statement published on its website. The reversal could take a while because the Moscow Exchange’s stock trading has been shut down since Feb 25.

But Vanguard’s new statement amounts to a more aggressive posture than last week, when the firm said it would not restrict portfolio managers’ investment decisions.

AmerisourceBergen is one of the top-three largest drug distributors in the U.S., and a spokesperson Tuesday said its continued operations in Russia align with its “purpose of creating healthier futures for people worldwide.”

The company’s World Courier service operates in dozens of countries, providing transportation and logistics for the biopharmaceutical industry. In 2016, the service expanded to a larger facility in Moscow to keep up with the growing market for clinical trials in Russia.

“We continue to operate in Russia but expect some service impact to international shipments due to the cancellations in international flights,” according to the company’s World Courier service website Tuesday. The site also said that “operations in Ukraine remain suspended to ensure the safety of our team members, partners and customers.”

World Courier “operations in Russia, while limited, do continue with a focus on distributing pharmaceutical and medical products to patients who otherwise wouldn’t have access to the medication they need,” AmerisourceBergen spokesperson Lauren Esposito said. “The distribution of these products, including potentially life-saving treatments, primarily supports patients enrolled in clinical trials.”

AmerisourceBergen was one of about 30 companies operating in Russia and highlighted by Yale School of Management professor Jeffrey Sonnenfeld, who argued for a business retreat from Russia, saying it would help weaken Russian leader Vladimir Putin.

“This is supposed to be very harsh,” Sonnenfeld said in an interview. “It’s black and white,” he added. “There’s no middle ground. There’s no gray.”

Sonnenfeld and colleagues at Yale have tracked 290 companies that had curtailed business in Russia, as of Tuesday, along with a smaller list of firms that remain in the country with “particularly significant exposure to Russian markets.”

“In the days since we initially published our list, many of the ‘remain’ companies have responded to public backlash and decided to withdraw, and we are continuously revising our list to reflect these decisions as they are made,” Sonnenfeld’s tracking site says.

AmerisourceBergen generated $214 billion in annual revenue its last fiscal year, which ended Sept. 30, 2021. World Courier’s revenue isn’t reported separately, but revenue growth at World Courier contributed to higher gross profits in 2021, up 33.7% to $6.9 billion, according to the company’s annual report.

CEO Steve Collis, in a Feb. 25 post on LinkedIn, recognized “our 11 World Courier colleagues, who along with millions of other Ukrainian citizens, find their lives and freedoms at risk.”

Collis’s post also said that the company was responding to requests for access to medical supplies in Ukraine, and that the company’s foundation had assembled more than $100,000 in relief funds for groups in Ukraine providing care.

Vanguard’s exposure to Russia was already fairly small compared with that of other fund firms.

The Vanguard fund with the most exposure to Russia is its Emerging Markets Select Stock fund. And it had just under 1% of assets in Russian equities, as of Feb. 28, 2022.

That’s a relief for shareholders in these Vanguard funds, as the Russian ruble has plunged against the dollar, and the MOEX Russia Index, which tracks the 50 largest and most liquid Russian companies, is frozen.

“It’s a good statement, though exactly how Vanguard will exit — and at what price — those Russian securities remains to be seen. The Russian stock market is still closed,” said Jeffrey DeMaso, director of research at Independent Adviser to Vanguard Investors newsletter.

The London-based FTSE kicked Russian stocks out of its indexes effective Monday, he said, “so those fund managers, technically, if they’re following the indexes, have to sell Russian stocks.”

The overall exposure to Russia in Vanguard funds accounts for less than 0.01% of all client assets – and the vast majority of that exposure is in index funds.