As the former goalie of Stanford University's soccer team, Craig Ueland, president and chief executive officer of Russell Investment Group, learned some early lessons about team leadership. He's put them to use at the Tacoma, Wash.-based firm. Of his 23 years at Russell, about a dozen have been spent expanding the firm's business overseas. He opened Russell's Sydney, Australia, office in 1986, and served as head of Russell's Australian operations until 1990, when he assumed overall leadership for the company's international business.
Expansion overseas is only part of Russell's growth story. During Mr. Ueland's tenure, the firm has sprouted from its investment consulting roots to include indexes, asset and transition management services as part of the business.
Mr. Ueland became president in July 2003 and CEO in January 2004. With $171 billion under management worldwide as of June 30, Russell's assets have more than doubled in the past three years and institutional assets worldwide have grown 120% in that same period.
How will Russell continue growing assets? Open architecture is, we believe, a long-term trend, as is globalization. Russell is the ultimate open-architecture firm. Investment managers get hired based on their skill in different categories, and Russell has clients in 44 countries. So as the whole move toward quality, trusted partners and open architecture continues to grow, we think Russell is well positioned to have a tail wind ...
What are Russell's goals for developing business overseas? Back in the '80s and '90s, one of the goals was to make Russell a global enterprise ... and I was one of the lead implementers of that as head of international. Our definition at the time was that our non-U.S. business, our business outside our domestic market, would be more than half of the total enterprise. I'm pleased to say we now are, by that definition, a global business. We have just over half of our business (in terms of net revenue and assets under management) coming from 43 countries outside the U.S. The U.S. is by far the biggest country, but we have seven other countries that we have at least 3% of our worldwide revenue coming from: Canada, U.K., Netherlands, France, Italy, Japan and Australia.
Why was it important to create the global indexes? The original Russell indexes evolved because we needed a better set of benchmarks to help research managers for our clients, and there was not a good small-cap benchmark or good growth and value benchmark. Consistent with that in the last 10 years, we've had many, many clients ask us for global benchmarks with the objectivity and quality that Russell has had with the U.S. indexes. We'd been hesitant to do it because it's a big endeavor, it's expensive, and you have to believe you can really add sufficient value. But our own client advisory board on the Russell indexes has unanimously said over and over again: "Hey, the marketplace needs another set of benchmarks to measure the equity markets." Over time, we have been able to license the indexes for everything from derivatives to passive managers to ETFs, so it's become profitable. That has allowed us to fund additional research in the index area.
What do you think of the continued march by broker-dealers into the transition management business? We welcome them. What's interesting about our business (is what) I call the genius of George Russell (the company's chairman emeritus). Russell often enters areas because we see a need for clients. In transition management, we entered because most investment managers and brokers weren't thinking about the needs of the plan sponsor when they executed trades. Russell's expertise is to bring the perspective of the fund owner into how you manage transitions, and make sure it's done on an objective and transparent basis. So we've been able to build a wonderful transition management capability in the last 10 years. And the genius of George Russell ... he believed if you took profits from Russell and plowed them back into more manager research, more capital markets research, Russell indexes and new execution or transition management capabilities … that (would be) the engine that fuels more client demand. We have three core values at Russell. One of them is: Exceed client expectations. If you exceed client expectations the client will refer you to other business and business growth will take care of itself.
What is driving the trend toward outsourcing pension plans? In the U.S., the trend started in the early '90s with the recession. You were getting major companies focusing on management of their pension investment, and (questioning) how much of that is a core competency that should be done internally ... We saw the acceleration in our investment management strategic relationships, or outsourcing business, dating back to that period. We have 200 clients in the U.S. alone where we manage the vast majority of their assets, so we are the long-time leader in that field. The trend has accelerated with the most recent recession (as well as with the) change in the regulatory and accounting environment, and lower interest rates. That's made many CFOS and CEOs question whether they should even have a defined benefit pension plan. I am convinced that the trend away from DB pension funds for corporations in the U.S. will continue. ...
How does Russell balance demands between the consulting and outsourcing businesses? Our consulting business is our marquee business. The consulting business, along with the Russell indexes, is the two areas (in which) we are best known. In both cases, they feed knowledge capital and insights back into Russell's research process. Worldwide, we only have 200-some consulting clients. We advise $2.4 trillion in client assets, which is still the largest of any organization.
Do you expect a "DB-ing" of DC plans? One of our goals in helping improve financial security for people … is to bring best practices from what DB funds have done for years to DC investors. And that includes having a long-term horizon, picking quality investment managers, maintaining your strategy discipline and ensuring you have proper diversification in the portfolio. The average DC investor has little information on which to base those decisions, and because of that tends to follow trends, not anticipate them. ... I think one of the good outcomes for the DC industry would be if it learns from the best practices of CFOs and treasurers from corporate DB-land.
Does Russell plan to pursue more foreign distribution alliances? If you look at our institutional business we sell and service clients directly. When you get to individual investors … our preferred model is to work with partners who have dominant positions in some market segments, maybe geographic regions, certain segments (such as high net worth). We have built up a list of dozens of alliances around the world. The very first one outside the U.S. was Richardson Greenshields in Canada in 1993; SocGen (Societe Generale) was our first large one in Europe in '98 and continues to prosper. We are planning to launch into their entire retail network in France (in the third quarter), which is a very big deal because usually these big European banks like to sell proprietary stuff. But open architecture is becoming quite common in Europe.
What needs could Russell fill through another acquisition? We are fortunate to grow organically at relatively rapid rates, even for our industry. In the 23 years I have been here, our compound growth rate is 21%. We don't have any strategic goal or need to make acquisitions to fuel future growth. That said, we live in changing times and if an opportunity arose to add capability or build our business, we'd look at it.
What activities do you enjoy outside of Russell? I am a longtime soccer player. ... I was the starting goalie at Stanford University. This year I'm going to coach my 6-year-old twins' co-ed soccer team. Overall, I spend my non-working and non-traveling hours with my wife and kids.
