Russell Investment Group has brought to Australia a unique equities fund strategy which takes its overweight positions from the stock selections of other managers in its multi-manager lineup.

The fund, called the ‘select holdings strategy’, will be allocated 5 per cent of the $5 billion Russell Australian Shares Fund, at the expense of Contango Asset Management’s 10 per cent mandate. The other 5 per cent of the Contango money has gone to Invesco Australia. The new fund’s strategy has been operating overseas since the end of 2004. It was flagged in Australia last year at the Russell client conference on the Gold Coast. Russell, as manager, looks at the positions of the five other Aussie shares managers and when two or more have overweighted a certain stock, that stock is ranked alongside other overweighted positions to eventually form a portfolio of ‘best ideas’ for which the managers have the highest conviction. By its nature, the fund is a concentrated portfolio with a high tracking error. Peter Gunning, Russell’s chief investment officer, said: “Russell is in a unique position to leverage the information inherent in running our multi-manager funds. This strategy can only be implemented by a highly sophisticated multi-manager with a depth of manager knowledge and the ability to identify the securities the managers hold in common.” Russell says research based on more than 10 years of historical manager holdings shows that stocks independently selected by multiple managers generated outperformance of two to six times greater than that of the underlying manager portfolios. To date, investors in the US and Europe have invested over $3 billion in the strategy, which has been adopted in 17 Russell funds globally. In other changes to the multi-manager lineup announced yesterday, Russell has replaced Westpeak with MIR for 20 per cent of its ‘aggressive’ Australian shares fund, and has added Loomis Sayles to its bond fund, with a 25 per cent allocation as a core manager. The ‘select holdings’ fund is currently only available through the Australian Share Fund, however, Russell is looking at ways in which it may be offered directly to investors in the future.

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