For more than three decades, Russell has devoted considerable resources to identifying, hiring, and managing some of the best money managers in the world.
Russell uses a manager-of-managers approach within investment products. No matter which asset or style is in favor at any given time, this complementary blending of managers can reduce your risk and help provide more consistent returns through all kinds of market environments.
Each year, through an integrated worldwide network of analysts, Russell evaluates more than 1,100 investment managers and more than 6,600 investment products globally.
Russell's analysts hold more than 2,000 research meetings annually—the majority of which are face-to-face—to study each manager's quantitative and qualitative characteristics.
Russell research and monitoring identifies managers worth further scrutiny. Additional research leads to decisions about which managers will ultimately be selected for Russell products globally.
Using various proprietary factors, Russell determines which managers are currently adding value in their style through superior processes and exceptionally talented individuals.
These main factors include:
- Stability—Which manager teams and organizations will have the lowest turnover.
- Superior Environments—Which organizations are most likely to produce above-average returns.
- Performance Indicators—Which style and investment techniques and organizational traits best support potentially superior manager performance.
Russell evaluates these factors, covering regional and multicurrency products in all major equity and fixed-income markets:
- Equities (single country, emerging markets, and global/international)
- Fixed income (single currency, multicurrency, and convertibles)
- Global and domestic asset allocation
- Currency strategies
Because research confirms that past performance is not predictive of future performance, Russell's approach gives the most weight to the value of the manager's investment process and the strength of the manager's organization.
The following illustration compares Russell's selection criteria to the competition.
To be on top one year, a manager has to take a lot of risk—risk that is just as likely to land them on the bottom in the following years. Russell's goal is to select managers who have historically performed better than average on a consistent basis.
If you simply pick today's top manager for your investment, you may not be prepared for the long run. For example, in 1998, of our total of 109 U.S. equity managers, 27 managers composed the top quartile, or the top 25% of U.S. equity managers. Out of those 27, 18 remained in the top quartile the next year. Exodus from the top quartile was swift and no manager was still there in 2000, 2001, 2002 or 2003.
2002 - 2006
Source: Russell Investment Group's Equity Accounts Universe of 109 major banks, insurance companies, and investment advisors with five years of return history ending Dec. 2006.
Russell's research analysts use an unmatched, proprietary database of qualitative and quantitative characteristics to identify managers most likely to outperform their benchmark indexes and their peers.
The following table includes some of the characteristics that Russell analyzes.
||Performance against peer groups|
||Performance against benchmarks|
|Economic and securities research
Many changes can occur in funds, and investors aren't always aware of them. A manager may leave a firm, or a manager might alter their investment style unexpectedly. For these reasons, Russell continuously monitors its managers to make sure they stick to their assignment, replacing them if necessary. This way, your investment stays on track with your goal.
Russell's continuous research approach also helps keep the money manager turnover rate in the low 7% to 10% range, which keeps costs down. Other approaches are susceptible to much greater turnover rates because they are driven by performance, which is inherently volatile.