George Russell puts his money behind his ideas, even if there is no obvious payoff.
Shortly after the fall of the Berlin Wall, Mr. Russell, chairman of Frank Russell Co., decided there would be investment opportunities arising from the movement of countries from command to market economies, and U.S. pension funds should eventually benefit.
In particular, China, Russia and India, which encompass almost half of the world's population, but only 1/25th of its per capita income, would offer investment opportunities in the future, he thought.
He realized the first capital flowing into these countries would come from venture capitalists, governmental agencies and corporations. Only later would pension funds be interested, and they would have to learn about the countries before they would invest.
So he started the Russell 20: 20 Association, made up of 20 plan sponsors and 20 institutional money managers, to help them learn about the restructuring countries first-hand through travel.
The group is a who's who of the pension investment community. Pension fund members include General Electric Co., General Motors Investment Management Corp., IBM Corp., the New York State & Local Retirement Systems and the State of Wisconsin Investment Board.
Investment management members include AIG Capital Corp., Bankers Trust Co., Chancellor Capital Management Inc. and Fidelity Investments.
In May 1992, the group took its first study trip to Eastern Europe, visiting Prague in the Czech Republic and Warsaw in Poland. In 1993, the group traveled to China, where a dinner for it was attended by five Chinese vice presidents, 20 ministers of state and 200 Chinese businessmen. In 1994, the group went to Russia and in 1995, to India.
On May 17 this year, the group will meet in Kiev, Ukraine, and will travel to Bucharest, Romania, and Istanbul, Turkey. In Ukraine and Romania, it will be hosted by the presidents of the two countries.
What the members do with the information, knowledge and contacts they gain from the trips is up to them, but Mr. Russell said he believes a number have begun to invest in some of the countries they've visited.
What does Russell Co. get out of this? "Not much," Mr. Russell said. In fact, Russell Co. has subsidized the organization since its inception. It paid all of the costs for the first two years. Now the 20: 20 association's annual dues, $15,000 for plan sponsors, $20,000 for money management firms, pay between 60% and 70% of the costs. Nevertheless, it costs Russell Co. approximately $250,000 a year, exclusive of staff time.
Russell Co. does sponsor two emerging market funds - the Asian Infrastructure Fund and the Polish Equity Fund - but they are unconnected with the 20: 20 association.
Mr. Russell's motivation for starting the 20: 20 association was, and remains, to make a small difference in the newly opening countries, and to help pension funds and managers seek higher returns by becoming aware of prudent investment opportunities in those countries.
Mike Clowes
