Russell Investments has dramatically silenced doubters of its commitment to traditional asset consulting, winning a $10b client whose chief investment officer, in another guise, sacked them only 12 months ago.
Russell is into the third week of a new relationship with IOOF Holdings, whose chief investment officer Steve Merlicek has appointed the firm to assist with investment strategy, asset allocation and portfolio efficiency. Merlicek is in the process of streamlining IOOF’s underlying multi-manager divisions, United Funds Management (which accounts for roughly $6b of the total $10b under management) and IOOF Multimix.
Merlicek said he did not need to go through a tender process to decide on a consultant, having “thoroughly examined all the options in the market” during late 2008-early 2009 when reviewing the investment advisory arrangments for his previous employer, Telstra Super.
Back then, Merlicek and his board chose to sever Telstra Super’s 15-year relationship with Russell, awarding JANA Investment Advisors an exclusive contract.
However since then, Merlicek pointed to “important personnel changes” at Russell, which have included the hiring of Andrew Doman as global CEO, whose renewed focus on the traditional consulting business led in turn to appointments such as Greg Liddell, QIC’s former head of implemented equities, who joined last year as head of investment consulting in Australia.
Russell now had the flexibility of an unbundled offering, Merlicek added, giving IOOF the option to appoint additional consultants for niche areas if required.
Beyond investment consulting and manager research, Merlicek said IOOF would “look to take advantage of Russell’s dynamic range of portfolio efficiency
strategies such as emulation and Select Holdings. Russell’s strategic tilting capabilities and its strong actuarial practice are also areas which may be useful for the group.”
Acknowledging that Russell’s multimanager funds made it a competitor to IOOF in one respect, Merlicek was confident that potential conflicts would be managed and said Russell’s “more retail” pedigree actually suited IOOF’s needs, particularly in its attention to medium-term asset allocation, it’s built-in transition management capability, and the range of educational materials and seminars it could make available to IOOF’s staff and clientele.
Liddell said Russell’s newly honed “jump diffusion stochastic modelling” factored in the impact of ‘fat tails’ and “gets away from the simplifying assumptions which proved the undoing of many asset allocation strategies”.
Liddell promised that IOOF would be treated ” exactly the same way” as Andrew Snedden’s team running Russell’s ‘diversified strategies’ multimanager funds, which is to say as a client of his investment consulting/manager research team. He will be principal consultant to what is easily now Russell’s biggest traditional advisory client, and will be assisted by Stanley Yeo in Melbourne, a young consultant who came across with Russell’s Towers Perrin acquisition, whom Liddell earmarked as a potential “future leader” of the firm.