Russell Investment Group has built a model for the new-style of asset allocation which is starting to permeate institutional investment and has a research project underway to provide a framework for the new strategies.
Rob Blackwell, managing director, research and strategy, visited Australia last week to talk about recent Russell thinking on asset allocation and the firm’s research into both strategies and new investment types. The new model, built over the past year, involves a structure to provide outcomes for the various forecasts and relationships between the major building blocks of portfolio construction. Russell divides its diversified new-style investments into two camps: alternatives or private markets; and opportunistic investments. Alternatives include private equity, private real estate, infrastructure and so on. Opportunistic investments involve a high level of skill or timing, such as hedge funds, commodities, opportunistic property and esoteric markets. Russell plans to research a range of esoterics, such as catastrophe bonds, energy trading markets (such as oil and gas royalties) and even collectables. “We’ll research the markets and see what the manager communities are like within them,” Blackwell said. He foresaw a new paradigm in alpha transport strategies, suggesting that the ‘traditional’ approach where asset classes with “;natural beta”; had to be synthesised was sometimes a costly and inefficient approach compared with utilising asset classes like global tactical asset allocation which had no inherent beta.
Since taking over the top job at the $44 billion Funds SA more than a year ago, chief executive John Piteo has ushered in an investment function overhaul and wrapped up an important stage of the fund’s five-year data transformation program. It pledges to recentre around investment performance and more efficient processes, as the “missing piece” has been found in incoming CIO Con Michalakis.
Darcy SongJanuary 10, 2025
