LONDON — Russell Investments, one of the most successful multimanagers in building a global business, is facing a series of setbacks on the international front — including persistent performance issues, according to consultants and clients.
The multimanager is strongest among its peers in terms of international expansion, with 57% of about $228 billion in assets under management at year-end 2007 coming from outside the U.S., according to data from Tacoma, Wash.-based Russell. Five years earlier, 49% of Russell's total assets were from overseas clients.
Competitors Northern Trust Global Investments, Chicago; SEI Investments Co., Oaks, Pa.; and Wilshire Funds Mangement, Santa Monica, Calif., each had less than 30% of assets sourced outside the U.S., according to data provided by the firms.
As volatility in the global markets has reduced asset inflows for many managers in general, Russell has suffered a second blow from below-par returns in some key strategies overseas, according to several consultants and clients who spoke on the condition that they not be named.
Furthermore, institutional clients in Europe are generally moving away from “the standard equity and bond multimanager” strategies, said Daniel Peters, investment consultant and actuary at Aon Consulting in London.
“Many clients just don't see (traditional multimanagers in equities and bonds) as adding much value,” Mr. Peters said. “The alternative space, such as hedge funds and private equity, is where multimanagers can add a lot of value. This is where we're seeing much more interest.”
Yet the April closures of the Russell Alternative Strategies Fund and Russell Alternative Strategies Fund II — two of the three hedge funds of funds managed by the firm — have given a black eye to the firm's hedge fund business and might stunt Russell's growth in other alternatives, according to consultants.
Following the hedge fund blowups, Craig Ueland — former president and chief executive officer — was abruptly replaced on an interim basis by John Schlifske, executive vice president at Northwestern Mutual Life Insurance Co., Milwaukee, which is Russell's parent. Sources who are familiar with the companies say Mr. Schlifske is in line to succeed Northwestern Mutual's CEO Edward Zore.
“You don't just put someone like that into such a position without a good reason,” said an analyst specializing in financial services industry mergers and acquisitions, who spoke on the condition of anonymity. “I can't imagine that the parent company is pleased with the way the business has been run.”
Mr. Schlifske and Johan Cras, Russell's newly appointed interim CEO of Europe, the Middle East and Africa, declined to comment for the article, according to spokeswomen Jennifer Tice and Sarah Culpeper. Requests to speak to Northwestern officials were referred to Russell officials, citing the fund manager's independence as a company.