Multi-Style
The 2nd Level of Russell Diversification
When you invest in one Russell fund, you are usually investing in a single asset class that is diversified into several complementary styles. This blending of styles can help reduce risk and work toward more consistent returns. This way, your clients' investment is always working, no matter which style is in favour at the time.
What are Styles?
Professional investment managers use unique methodologies to decide which shares to buy to make up their individual portfolios. These methods can generally be categorised into one of several broad investment styles. For example, within the Australian shares, styles include growth, value, small capitalisation and aggressive strategies. For example:
- Growth — These managers are primarily interested in a company's earnings. They focus on investing in companies they expect to exhibit profitability and shareholder earnings greater than their industry peers.
- Value - Value managers are most interested in buying company shares at a good price. They may purchase shares of companies that are currently out of favour with the market, believing the stock is a good value for the price.
- Small Capitalisation - These managers focus on shares of smaller companies. Some of these companies are young and growing rapidly, while others are simply smaller businesses with long histories. These companies are characterised by low dividend yields and above-average volatility.
- Aggressive - These managers focus on purchasing shares not constrained to any benchmark. They tend to use innovative investment techniques and higher risk/return strategies, such as short selling and holding concentrated portfolios.
The Importance of Style
Russell uses comprehensive research, complex algorithms, and sophisticated technology to regularly evaluate fund managers for style. Confirming style is important because it ensures that your clients' investment remains appropriately diversified over time.
When your clients' invest in one Russell fund, their investment is diversified within each asset class into several complementary styles.
No matter which style is in favour at a time, Russell's blending of investment manager styles and complex style evaluation can help to manage risk and work toward more consistent returns, making your clients' feel more comfortable adopting, and sticking to, a long-term investment strategy.
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