A fresh approach: Face to Face with Andrew Doman

Russell's new CEO, the first from outside the company, takes over an industry leader after recent exodus of top executives

Snapshot

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Andrew Doman

  • Current position: President and CEO, Russell Investments
  • Assets under management: $136 billion, as of March 31
  • Investment staff: 700
  • Age: 57
  • Education: M.B.B.S., Adelaide University; B.B.S. economics, University of Ottawa; M.B.A., Australian Graduate School of Management
  • Personal: Married, two children
  • Performance (as of March 31, annualized for periods longer than one year):
  • RTC Russell Equity II Fund (U.S. small-cap)
    • One-year return: -40.0%  Benchmark: -38.2%
    • Three-year return: -17.8%  Benchmark: -16.0%
    • Five-year return: -5.5%  Benchmark: -4.5%
  • RTC Russell Emerging Markets Fund
    • One-year return: -48.3%  Benchmark: -47.1%
    • Three-year return: -8.3%  Benchmark: -8.2%
    • Five-year return: 7.2%  Benchmark: 5.9%
  • RTC Russell Global Real Estate Securities Fund
    • One-year return: -52.9%  Benchmark: -42.7%
    • Three-year return: -22.5%  Benchmark: -12.8%
  • Benchmarks (respectively): Russell 2500; MSCI Emerging Market-ND; MSCI ACWI-GD. Source: eVestment Alliance LLC

Andrew S. Doman stepped in as chief executive officer of Russell Investments in February following the abrupt June 2008 resignation of Craig Ueland, a 25-year veteran who had led the Tacoma, Wash., company since 2004. Mr. Ueland was one of a parade of top Russell executives — at least 15 in two years — to leave the company, many taking advantage of a generous stock plan.

Mr. Doman, a former epidemiologist and diplomat who spent 22 years working for McKinsey & Co., is the first Russell CEO from outside of the company. He faces a number of challenges, one of which is determining the future of Russell's hedge fund-of-funds business. Last year, the company decided to close two funds of funds after sustaining losses. Russell's money market fund also took a $764 million hit as a result of exposure to paper issued by Lehman Brothers Holdings Inc. The fund had to be bailed out by its parent company, Northwestern Mutual Life Insurance Co.

Mr. Doman chalked up the departures to nothing more than a number of executives reaching retirement age and ceding control to the next generation. He said he is focused on innovation and ensuring that Russell stays aware of “where the money is going to be, not where it has been.” At the same time, he is determined to maintain the company's reputation as an industry leader.

CEOs of the past have all come through Russell. How did it feel to be an outsider coming in? I think people have really tried to make me feel at home and I do feel at home already, even three months into the role. People have been enormously open and welcome and I think that's one of Russell's great values.

You've been going around meeting with different Russell offices. What have you found? What kind of changes do you think need to be made? Not only do (our clients) appreciate our advice and capabilities, they've also said they'd like even more of Russell. They'd like us to speed up. They'd like us to be more global. And because of that, we've announced some recent organizational changes, particularly the establishment of five new global service lines, which are designed to bring the very best of Russell to our clients as quickly as possible and to encourage thought leadership and innovation in these five areas.

What other changes are you implementing at the company? We've established a new innovation council, (where) product and service line innovation is going to be its focus. The innovation council is looking three to five years out and saying (how) would we like Russell to evolve. Where is the money going? One of my little mantras is Russell should be where the money is going to be, not where it has been. And so we are going to accelerate our plans to innovate in areas where our clients are moving. We'd like to be there first.

What do you bring to the table? What I think I bring is, first of all, experience leading important functions in a global consulting firm, a talent-driven firm like McKinsey. What you learn to do in a firm like McKinsey is motivate people, develop people, and stay close to your clients. So I think those skills that I've learned over the years at McKinsey are very, very relevant to what we're doing here. Secondly, I think having had 15 or more years leading the McKinsey asset management practice, I have learned a great deal about the industry, the competitors. I've worked for many of our competitors and I believe that has given me a unique perspective on the industry worldwide. ... I think there's a third factor as well that is having spent 22 years of my life in a leading strategy consulting firm, I think that I can bring those skills and strategy and organization to help Russell develop to the next level, to help Russell achieve its aspiration.

How do you envision the company growing globally over the next 10 years? Already more than 50% of our assets under management and our revenues and our profits come from outside the U.S. and we're very proud of that. We think that there is a great deal more growth for us outside the U.S. market. We think there's a great deal of growth inside the U.S. market too, I should hasten to say. ...

We believe much of that growth will come from Asia, much of it will come from Europe. ... We've signed our first big deal in China, in fact just a few weeks ago, and I believe there is a great opportunity for us in Asia and Europe. ... I was in Japan earlier this week and I received, I think, a very warm welcome from many of our partners there in Japan, where we have a very well established business. We also have a very well established business in Australia, where we continue to make strides.

Do you see rebuilding Russell's hedge funds of funds business? We were among the very first to identify the problem of liquidity that many of the hedge funds were having and to close our funds to new investment. That's been greatly valued by our clients, who otherwise would have, I think, suffered significant losses. ... We're currently reviewing the performance of different types of hedge funds. It turns out that some types of hedge funds and some hedge fund strategies have been much more successful in the recent downturn than others and we are examining that and our options to reenter that market.

What sort of timeframe are you looking at? There is tremendous demand from our clients for a hedge fund product. We are at the moment ramping up our hedge fund advisory manager selection service. And that may or may not be followed by a reentry, to enter into a new manager-of-manager hedge fund. I can't put a specific time on it but it is under active consideration.

How committed is Russell to continuing its consulting business? The consulting business is sort of the heritage of the Russell business and it's where George Russell started out many years ago now, 40 years ago now and more. And I think consulting will always be part of the Russell business. We're very proud of our heritage there. We believe our reputation ... as the leader in the consulting sector ... remains untarnished. ... It's important to us because it allows us to ... be on the client side of the table.

We hear that Russell is planning to expand its ETF business. Can you talk about that? Russell invented the Russell 3000, the mid-cap and small-cap index, because we wanted, we needed a benchmark against which to measure the performance of our funds and from that has grown another new business. ... From that, we were then asked by Barclays' iShares if we would allow the indexes to be used for the launch of the iShare ETF series and we have an extensive partnership with BGI/iShares for the use of our benchmarks and indeed as a result of that, we are, through iShares, the leading provider of benchmarks to the ETF industry. ...

We'd like to deepen our relationship with Barclays and we will consider other opportunities, including active ETFs. We have applied recently for a license to sell active ETFs. We're not sure whether we'll exercise that but we maintain an interest in that area. And that would be a way of bringing the best of our active management into the ETF market.