The last topic Russell Investments and Hamilton Lane executives discussed when they decided to form a strategic partnership was what ended up being the alternative investment firm's $90 million investment for a minority stake, said Michelle Seitz, Russell chairwoman and CEO, in an interview.
The companies said Tuesday that they formed a strategic partnership to provide Seattle-based Russell's outsourced CIO clients with access to Hamilton Lane's open-architecture private markets investment strategies.
Russell executives were most interested in ensuring that its clients understood that its deal with Hamilton Lane was more than a sub-advisory relationship, Ms. Seitz said.
"It put an exclamation point to Russell's clients that this is not a normal relationship but a strategic partnership," she added.
“Hamilton Lane is a firm believer of putting our money where our mouths are,” said Erik Hirsch, vice chairman and head of strategic initiatives in an interview. “We’re invested in the success of Russell and Russell’s clients,” he said.
Russell already had alternative investment capabilities, Ms. Seitz said, “(but) with the sheer explosion of alternatives and the access points, it became clear to me that we needed to strategically lean in — to build ... acquire or to partner.”
Russell needed the full depth and breadth of alternative investment capabilities "at warp speed" with a partner with the same fiduciary duty "touchstones."
In addition to Hamilton Lane's technology focus and extensive data on the private markets, she said that getting Russell's clients access to secondaries and co-investments is very attractive because they have been growth areas in terms of client interest.
The idea is to offer the sophisticated tools and asset classes — now available for the largest institutional investors — to the wider market of clients including middle market institutional and wealth market clients, Ms. Sietz said. "It is an opportunity in the wealth market and middle market to make sure we are user friendly," she said. But, she added, "Not every tool should be democratized because it may not fit the client's needs."
Russell has $327 billion in assets under management and $2.5 trillion in assets under advisement.
Hamilton Lane reported roughly $76 billion in discretionary assets under management and $581 billion in assets under advisement as of Dec. 31.
Hamilton Lane's client base is primarily comprised of institutional investors. Firm clients also include insurance companies, financial institutions, family offices and "selected high net worth individuals," according to its latest SEC filing.
"The private markets are not uniformly accessible and that is a challenge," Mr. Hirsch said.
Mr. Hirsch said the deal was not about expanding Hamilton Lane's client base or adding distribution capabilities.
Hamilton Lane will be offering services for Russell's clients, Mr. Hirsch said.
Russell is in charge of building customized portfolios for its clients and for managing them, he said. "We are here to play a small part of that," Mr. Hirsch said.
The deal is expected to close in April.
