Russell Investments still needs to figure out what it wants to be when it grows up.
After building a reputation as a top-notch investment consulting firm and a leader in manager-of-managers programs, the Tacoma, Wash.-based firm branched into alternatives.
Now it appears to have lost its way: It disbanded its hedge fund-of-funds operation in 2008 and last month sold private equity manager Pantheon Ventures Ltd. to Affiliated Managers Group Inc. for $775 million.
Stephen Nesbitt, chief executive of Cliffwater LLC, a Marina del Rey, Calif.-based alternatives consulting firm, said that historically, Russell had a reputation as a very good consulting firm, but has to decide what direction it wants to take now.
“It's unclear they know what they want to do,'' he said.
Jennifer Tice, a spokeswoman for Russell, disagreed. She said while Russell has been affected by the financial downturn — like many others in industry — the company is determined to continue its leadership role in providing financial services.
“We are in a whole new environment for financial services firms and we plan to deliver the innovative investment products and services that our clients desire,” she said.
Industry observers say Russell might have been too ambitious in expanding beyond its core expertise of consulting and running traditional multimanager investing strategies for pension funds.
Russell, like other financial companies, had aspired to be a global player in a wide variety of investment products, said Leonard P. Brennan, president and CEO of Rainier Investment Management Inc. in Seattle and Russell's former managing director of individual investment services.
“For any investment organization, that's a difficult challenge,” he said. “My observation is most players are very substantial in a core competency or are a leader in a geographical area. It's hard for a company to dominate in a wide range of products and services.”