Market valuation losses leave Russell ESG ETF with lower net assets

Investment losses erase prior-year profit

Russell Investments Australian Responsible Investment ETF (ASX:RAR) moved from a $69.892 million profit to a $304,000 loss in the year ended 30 June 2026, as valuation losses on its portfolio overwhelmed dividend and distribution income. The fund recorded a $14.664 million net loss on financial instruments measured at fair value through profit or loss, compared with a $55.891 million gain in the previous year.

That swing came despite distribution income rising to $16.437 million from $15.926 million. Management costs increased to $2.032 million, while transaction costs remained modest at $109,000. The result was a total investment income of $1.837 million, down sharply from $71.841 million in FY2025.

Distributions rise while net assets contract

The accounting loss did not prevent the fund from paying or accruing a larger distribution. Total distributions rose to $24.388 million, or 168.11 cents per unit, from $18.278 million and 127.03 cents per unit a year earlier. The final distribution accounted for 115.09 cents per unit, with the balance coming from the interim payment.

Net assets attributable to unitholders fell to $413.365 million from $448.142 million. The decline reflected the weak investment result, distributions and a net reduction in units on issue: 1.425 million units were redeemed during the year, against 825,000 units issued through applications. Units on issue ended the year at 14.279 million, compared with 14.643 million previously.

Portfolio remains concentrated in listed Australian assets

The fund held $425.691 million in financial assets at fair value at 30 June 2026, including $388.818 million in Australian equities and $36.873 million in Australian unit trusts and real estate investment trusts. All of these holdings were classified as Level 1 assets, meaning their valuations were based on quoted prices in active markets rather than significant unobservable assumptions.

Russell said the fund’s reported total return for the year was 0.05%, comprising distributions and changes in the post-distribution unit price. Its mandate remains unchanged: track the Russell Australia ESG High Dividend Index before fees and costs, investing predominantly in Australian shares and listed unit trusts after ESG-related exclusions.

Market sensitivity remains the central risk

The accounts illustrate how quickly an equity ETF’s accounting result can change with market valuations. The fund’s sensitivity analysis estimated that a 15% increase or decrease in underlying investments would change net assets by approximately $63.854 million in either direction at the reporting date. The filing cautions that this is a hypothetical measure based partly on historical data and is not a forecast.

Price risk is therefore more consequential than the relatively small management and transaction costs. The fund ended the year with $2.797 million in cash and $16.435 million in distributions payable, while the directors reported no subsequent event expected to significantly affect its financial position or results. PricewaterhouseCoopers issued an unqualified audit opinion, leaving future returns primarily exposed to the index and the market conditions affecting its holdings.