‘Chief Investment Officer’, the US-based industry magazine, has a bold lead story in its December issue. It says: “By the time you read this sentence, Russell Investments may be no more.”
The magazine’s online newsletter, aiCIO, said on November 20: “If you read this in November, Russell will likely remain what its official biography claims it to be: an industry-leading asset management and servicing business with a global reach but humble Seattle roots.
“If you read this in December or beyond, that may not be the case. Sometime that month, insiders say, the London Stock Exchange (LSE)—which in June purchased the firm from Northwestern Mutual for US$2.7 billion—will decide whether or not it wants to sell everything but Russell’s vastly profitable index business. According to multiple former and current Russell employees, this is exactly what it plans to do.
In this scenario, a quick auction will see a private equity or non-American financial firm, looking for a foothold in the US market, take over the venerable remains of Russell.
“But whenever you read this, what you’ve been told about Russell Investments—its history, its people, its place in the market, and its future—is wrong.”
That last paragraph is probably a stretch. No-one at Russell nor LSE has publicly committed the new owners to ongoing support and management of Russell Investments. In fact LSE stated that the index business drove the deal and in various broker briefings the rest of Russell hardly got a look in.
Russell Investments consists in most countries, including Australia, of funds management through a range of multi-manager strategies, traditional asset consulting and implementation services, including transition management. In the US and UK, Russell has also had some success with what has been popularly known as an “outsourced CIO” role, which is roughly the same as “implemented consulting”.
In some countries, too, such as Australia, the asset consulting arm has been integrated almost completely with funds management to the point that standalone consulting client numbers have fallen away. In the US and UK, however, asset consulting is still reasonably influential.
‘Chief Investment Officer’ magazine believes that the most likely buyer of Russell Investments is a private equity firm or firms, perhaps with management’s involvement, or a non-US manager looking to get a big leg-up in the North American market. If the magazine is right, we should find out this month.