TACOMA, Wash. — Russell Investments is on the hunt for a new business strategy and a new president and chief executive officer.
Russell executives need to shore up the alternatives offerings and distribution capabilities to bring the firm back to its former glory and effectively compete with SEI Investments Co., Oaks, Pa., which has surpassed Russell as the leading U.S. multimanager of institutional tax-exempt assets, according to consultants.
“SEI has out-Russelled Russell,” said Charles “Chip” Roame, managing partner of strategy consulting firm Tiburon Strategic Advisors LLC, Tiburon, Calif.
As of Dec. 31, SEI managed $64 billion in multimanager portfolios for U.S. institutional tax-exempt clients vs. Russell's $58 billion, according to data reported by the firms to Pensions & Investments. Russell hired Boston Consulting Group Inc., Boston, at the beginning of the year to help crystallize its business strategy, said sources familiar with the firm's operations. Eric Gregoire, spokesman at Boston Consulting, declined to comment.
Meanwhile, the surprise exit of President and CEO Craig Ueland on June 9 has left firm officials fielding questions from employees and industry observers.
Industry watchers are speculating that Russell's spectacular hedge fund blowup — the firm had to liquidate some $6 billion in two hedge funds of funds and is winding down its non-directional hedge fund offerings — could have hastened Mr. Ueland's departure.
Mr. Ueland did not return three calls for comment at his home.
Jennifer Tice, spokeswoman at Russell, said Mr. Ueland and the board of directors agreed on Mr. Ueland's resignation, saying it was time for new leadership.
“Sometimes it's good to take a change of direction ... and that's what we've done,” said one source familiar with the firm, who requested anonymity.
Mr. Ueland was replaced on an interim basis by John Schlifske, executive vice president at Milwaukee-based Northwestern Mutual Life Insurance Co., Russell's parent company. Mr. Schlifske will return to Northwestern once a new CEO is found, Ms. Tice said.
Russell's major lines of business are asset management, consulting and index construction, with asset management being the major revenue driver. The firm also offers transition management services. Assets under management doubled to $213 billion in the 4½ years Mr. Ueland was CEO. Institutional assets grew to $52 billion as of March 2008, up from $28 billion five years earlier, according to data provided by Russell.
While growth has been strong, some changes need to be made so that Russell can again be the pre-eminent U.S. multimanager.
“Russell was the leader of the multimanager approach ... but SEI was quicker to commercialize it,” Mr. Roame said. SEI is considered to be Russell's leading competitor in the multimanager business.