The state government’s investment corporation Funds SA has been working since February to divest itself from $60m in Russian securities following Russia’s invasion of Ukraine.

In an update on March 9, Funds SA said its Russian holdings had been whittled down to $9m – approximately 0.02 per cent of its $41bn in assets under management.

But in an update to parliament on Tuesday, Treasurer Stephen Mullighan said Funds SA now “indirectly” holds $10.6m in Russian assets, primarily due to pooled fund arrangements with third parties it can’t exit from without incurring significant financial penalties.

“As far as I understand it, the $10.6 million is largely if not completely a reflection of the value of the assets held within those pooled fund arrangements, assets which we would class as being indirectly held,” Mullighan told parliament.

“There are other assets which are still held by Funds SA directly that don’t have any value at all.

“That largely reflects the incapacity to trade in them, to find a buyer for them, hence them having no value.”

The Malinauskas Government, which pledged before the election to “end Funds SA’s Russian investment”, introduced a Bill to parliament giving the Treasurer the power to direct the investment body to divest itself from Russian securities.

However, the legislation allows Funds SA management to exercise discretion if it determines divesting from those assets would not be prudent or consistent with its obligations to stakeholders.

Liberal MP David Basham asked the Treasurer what actions would be taken if Funds SA was unable to fully divest itself from Russian assets.

Mullighan responded: “Perhaps I can answer that by admitting that we’re confronted with that very circumstance right now.”

“We’re confronted by this in some respects because if Russian assets are frozen, if there are onerous financial sanctions on Russian financial assets, then it is impossible to trade in them,” he said.

“If you try and sell something, you clearly have to have a buyer for it, and if there are broad scale sanctions on Russian assets it’s very difficult if not impossible to find a buyer for those assets.”

Mullighan said the latest update from Funds SA was that it had sold three “directly held” Russian assets but still has 19 on its books which have no trading value.

In terms of “indirectly held” Russian assets, Mullighan said Funds SA still has 52 pooled fund securities, 21 of which “have been written to zero value”.

Mullighan said the remaining 31 securities still have liquidity and “that’s where the $10.6 million of remnant value lies”.

Shadow treasury spokesperson Matt Cowdrey asked Mullighan if Funds SA has a timeframe for when it expects to be fully divested of Russian assets, and how Funds SA defines divestment.

Mullighan replied: “Divestment is not making sure that we’ve got zero value of Russian assets within the entirety of the portfolio, it’s making sure that we… no longer have a holding or an interest in that investment.”

“In terms of when that’s going to happen, no, we don’t have a timeframe for that because it requires the capacity to be able to divest of it and… find a buyer for it.

“The experience has been that in many cases it’s been impossible to do that.

“I’m guessing that the three [directly held assets] that were able to be divested of happened some time ago, and it’s the 19 that have been difficult to divest of subsequently.”

Mullighan also said the power to direct an independent investment body on how to invest its funds was “quite an incursion” and he would be “uncomfortable” with this being in place “outside of this very specific circumstance”.

“That’s why the bill has been drafted specifically with reference to Russian assets, to make sure that this new capacity for a minister only relates to this circumstance with Russia,” he said.

“If I can speak for the [Funds SA] board and executive, they would be highly uncomfortable with a minister that’s got an ongoing general capacity to direct where investments are made.”

The Funds SA divestment Bill passed the committee stage of debate in parliament on Tuesday with Opposition support.