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RUSSELL RESEARCH
RUSSELL RESEARCH
Our analysts are renowned for their cutting-edge research on capital markets and best practice for the investment industry.
In our capital markets research we share with you our latest thinking, to help you address the challenges you face today.
Retirement Solutions 1: Gaps in the state of the art
April 2012
Don Ezra, Co-Chairman, Global Consulting
Michael Clarke, Managing Director, Government & Industry Funds
Tim Furlan, Director, Superannuation
Graham Harman, Director, Capital Markets Research
This paper is the first in a three-part series addressing the retirement solution needs of superannuation fund members. Retirement Solutions I: Gaps in the state of the art looks at a stock-take of post-retirement member circumstances, characteristics, and financial needs and wants. It reviews the presently available product and service offerings and delineates the gaps in that offering. Concluding with a listing of the key learning's from our "gap" analysis; and address the question: "What do those learning's tell us about the likely characteristics of an effective post-retirement solution?"
Forthcoming papers in this series are:
- "Retirement Solutions II: A Blueprint for Super Funds"
- "Retirement Solutions III: DB Engines for DC Vehicles"
To request a copy of the paper please contact
Michael Clarke +61 2 9229 5266
Watch the video 
Transition Management with an After-tax focus
May 2012 | Daniel Birch, Portfolio Manager and Raewyn Williams, Director, After-Tax Investment Strategies
Introduction to the importance of considering after-tax performance in a transition event.
Collateral management: Aligning FX risks with the right risk management
April 2012 | Aran Murphy, Product Strategist; and Joe Hoffman, Head, Currency & Fixed Income Derivatives
As credit market conditions deteriorate, faith in the health of bank balance sheets and general creditworthiness of banks has suffered. As was the case in late 2008, concerns over counterparty risk are competing with market and operational risk concerns. This is particularly the case as challenges for the Euro foreshadow with the declining creditworthiness of many financial institutions.
The case for tactical trading for non-profits
April 2012 | Mark Raskopf, CFA, Head of Tactical Trading Strategies; and Darren Spencer, Director, Alternative Investment Consulting
What potential role can investors expect tactical trading to play in a diversified hedge fund strategy?
Australians and Infrastructure Investments
March 2012 | Nicole Connolly, Director, Alternative Investments
This research paper explores the nature of the infrastructure market and discusses how investors can access these opportunities, while being aware of the challenges facing the industry. Infrastructure will continue to have a place in multi-asset portfolios - the key for success is to understand the specific characteristics of the underlying assets and to assess the most appropriate options for access in order to achieve exposure to the desired attributes that investors have enjoyed over the last 15 years.
Dividends are the new black – why classic always come back in fashion
March 2012 | Scott Bennett, Portfolio Manager
Any balanced and well diversified portfolio needs an element of growth, but income as a source of return should not be overlooked and left for the bottom drawer.
Loosening the restrictions on restricted currencies
March 2012 | Michael DuCharme, CFA, Head of Foreign Exchange; Christina Shockley, Associate Trader
Emerging markets are booming. Excellent investment returns were realised and investors are looking for further gains. This research paper considers ways to minimise transaction costs to enhance gains both for the asset and the foreign exchange (FX) transaction required to settle the asset trade. We highlight the restrictions on popular emerging market currencies and identify two currencies with potential for savings from third party trading.
Global Cleantech – Quantifying its place in your portfolio
March 2012 | Sam Porath, Consultant
Cleantech is a sector which is attracting growing interest from institutional investors, governments, corporations and publics around the world. Should investors make an allocation to cleantech and, if so, how much? We present breakeven analysis which provides a quantitative framework for investors deciding whether to allocate to global equity sectors.
Managing risk in investing with larger, brand-name investment managers
February 2012 | Dianna Zentner, Director, Global Manager Oversight & Due Diligence
Large firms are not necessarily "safe", and due diligence can help protect fiduciaries.
Equity strategies for Insurers
January 2012 | Thomas Gillespie PhD, Director, Investment Risk Advisory; Graham Harman, Director, Capital Markets Research; and Whitlam Zhang FIAA, Analyst, Consulting & Advisory Services
How can insurance companies add equities to the asset mix while controlling risks and capital costs?
Choosing investment risk systems
January 2012 | Thomas Gillespie PhD, Director, Investment Risk Advisory, and Bruce Curwood, CFA, Director, Investment Strategy
Navigating the minefield of investment risk systems to meet requirements, and to make it a productive part of the investment process.
Downside Protection: a practical pre-transition solution
January 2012 | Adam van Ness, Head of Transition Portfolio Management, and Tom Fletcher, Managing Director, Overlay Services
Considering “Downside Protection” – a strategy designed to limit equity losses, but not the upside potential.
Risk control strategies for Super Funds
December 2011 | Thomas Gillespie PhD, Director, Investment Risk Advisory; and Graham Harman, Director, Capital Markets Research
How can superannuation funds control the biggest risk to members – equity exposure?
A plan for all seasons: NFP spending rules
December 2011 | Raewyn Williams, Director, After-Tax Investment Strategies, and Anna Hocking, Director, Government & Institutions
How not-for-profit entities can use spending rules and investment management to ensure sustainable mission practices
Beyond turnover – why After-Tax Investing (ATI) requires a more informed approach to turnover
November 2011 | Raewyn Williams – Director, After-tax investment strategies
This paper examines the emerging 'call to action' faced by superannuation trustees to focus on after-tax, rather than pre-tax, investment outcomes. It explores one area of ATI, portfolio turnover, and suggests that trustees are in danger of asking the wrong questions about turnover. Several insights are offered about where turnover really 'bites' into after-tax returns.
Dropping the pilot – do you need a Strategic Asset Allocation
November 2011 | Graham Harman, Director, Capital Markets Research; Migara Alles, Analyst, Consulting & Advisory Services
Asset Allocation processes have been tested to the limit in recent years, as wildly gyrating markets, extremes of asset pricing, and changing investor circumstances challenge traditional thinking. Some investors are sticking to the disciplines of a fixed Strategic Asset Allocation, others have seen value in tactical overlays or strategic tilts, while a growing number are moving to more dynamic or "adaptive" approaches. What type of Asset Allocation process is right for your fund?
Volatility Responsive Asset Allocation
October 2011 | Bob Collie, Chief Research Strategist; Mike Sylvanus, Senior Investment Strategist; Michael Thomas, Head of Consulting & CIO, Americas Institutional
Markets can be relatively stable at some points in time and explosively volatile at others. This means that the risk associated with a traditional (fixed-weight) strategic asset allocation policy can be highly variable over time. This paper explores the possibility of a dynamic asset allocation policy that varies as market volatility changes.
Squeezing the Lemon: Driving insurance profits in the new investment landscape
November 2011 | Graham Harman, Director, Capital Markets Research and Dr Thomas Gillespie, Director, Investment Risk Advisory
Investment markets are posing significant headwinds for the insurance sector, with yields low and with equity markets held back by global concerns. In response to these challenging conditions, Russell Investments has published a research paper which looks at ways to "squeeze the profit from the lemon", and to work your asset portfolio harder.
Overcoming the limitations of traditional fixed income benchmarks
October 2011 | Clive Smith, Portfolio Manager
The last decade has seen material shifts in the composition of issuance in fixed income markets as countries have gone from booming economies with lower levels of government borrowing, to recession with governments having to effectively internalise a proportion of private sector debt. Such compositional shifts have highlighted the deficiencies in traditional fixed income indices. The aim of this paper is to discuss these deficiencies and to propose one potential alternative approach for investors when considering benchmarking fixed income portfolios.
The Future is Now: Australian Institutional Offshore Property Investment
September 2011 | Russell Investments / ANREV / AIST
Russell has partnered with ANREV and AIST to conduct research to identify and track the issues, concerns and opportunities facing investors as they consider offshore non-listed real estate investment.
Future Proofing for Industry Funds
August 2011 | Michael Clarke, Managing Director, Industry & Government Funds
Merging with another fund in an effort to address scale issues presents challenges towards achieving member value. In this first in a series of papers, we focus on better analysis of fund cost dynamics and long term solutions which provide a base upon which to deliver enhanced member services.
An unintended currency exposure: behavioural causes & solutions
August 2011 | Bruce Curwood, CFA, Director Investment Strategy; Tom Lappalaienen, Senior Consultant; Ian Toner, Director, Research and Communication
Many portfolios’ allocations to international securities contain unintended and often half-managed exposures to currency market risk. We identify the behavioural reasons behind this outcome, and propose a framework for better addressing the issue.
Assessing investment managers’ business, operational and compliance risks
August 2011 | Dianna Zentner, Director, Global Manager Oversight & Due Diligence
Investors are familiar with research and due diligence focused on money managers’ investment risks, but what about managers’ non-investment risks?
The volatility paradox: When winners lose & losers win
July 2011 | Bob Collie, FIA, Chief Research Strategist
Can an investment strategy have a positive expected return, but actually tend to lead to a loss of wealth?
Elements of a clearly defined investment policy statement for NFPs
June 2011 | Greg Coffey, CFA, Client Service Manager
This paper summarises what an investment policy paper is, the elements it should include, and why it is important for a NFP to have a well-defined government document.
Defensive equity: Is the market mispricing risk?
June 2011 | Bob Collie, FIA, Chief Research Strategist; John Osborn, CFA, Director, Consulting
This paper discusses a defensive equity strategy which offers the possibility of a reduction in portfolio risk and a more attractive trade-off between risk and reward.
Digging deeper: Institutional ETF investing in Australia
May 2011 | Amanda Skelly – Director, Exchange Traded Funds
This research considers whether the Australian ETF market will start to develop in line with global trends and explores current perceptions and uses of ETFs within an institutional portfolio.
Structuring a listed infrastructure portfolio
May 2011 | Adam Babson, Senior Portfolio Analyst
This paper discusses the risk, return and diversification characteristics infrastructure offers (as a real asset category) distinct from those of other asset classes.
How defined benefit plan sponsors think about risk management
May 2011 | Bruce Curwood, CFA, Director Investment Strategy; Don Ezra, Co-Chairman, Global Consulting
This paper has its origins in an experimental workshop “Risk management: An interactive case study” conducted at the 2011 Russell Institutional Summit.
On track for success: Benchmarking Australian property portfolios
May 2011 | Samantha Steele, Senior Research Analyst
This paper explores both general and property-specific benchmarks currently used by the Australian real estate industry, their drawbacks and why recent improvements provide additional options for Australian investors.
Structuring a private real estate portfolio
April 2011 | Leola Ross, Ph.D., CFA, Senior Investment Strategist; John Mancuso, CFA, Senior Research Analyst
With a multitude of options available to investors, real estate investments today can be tailored to specific portfolio goals and constraints.
Asked, but not answered
April 2011 | Raewyn Williams, Director, After-Tax Investing Strategies
How superannuation funds can use governance to answer the after-tax question.
Understanding opportunities in China’s investable growth
March 2011 | Lila Han, CFA, Senior Consulting Analyst
China has become a key driver of global growth, yet portfolio exposure makes little strategic consideration of how best to access its growth. This paper looks at portfolio considerations beyond equities to incorporate other Chinese asset classes, such as fixed income, real estate, private equity and infrastructure.
AIST/Russell Super Engagement Index and Study
March 2011 | AIST and Russell Investments
To date, there has been no reliable way to measure Australian's engagement with their super and the success of policymakers and the super industry in driving member engagement. Recognising this gap, AIST and Russell have partnered to develop Australia's first super engagement index to member engagement, and explore the drivers and barriers to engagement, and awareness of and attitudes towards super.
Conscious Currency: A new approach to understanding currency exposure
March 2011 | Ian Toner, Head of Currency Implementation
When it comes to currency exposure, Australian investors are generally well versed with the concepts and applications of hedging. However, with currency exposure recently becoming a major issue in the US, fresh analysis has raised some intriguing insights into the nature of currency exposure.
Integrating Environmental, Social and Governance (ESG) issues: Russell's manager research and sustainable financial value
Russell's interpretation of ESG issues and how that influences our manager research
February 2011 | Will Pearce, Senior Research Analyst, and Mike Clark, Director, Relationship Management and Chair, Sustainability Council
Investors are showing an increasing interest in ESG issues. This paper draws out the difference between a values-based approach and the concept of sustainable financial value, and discusses how this distinction can help inform an investor as they seek to specify their objectives.
Do you have the right global equity index?
Index and benchmark issues for Australian & NZ-based global investors
Institutional investors usually believe they have more immediate issues to worry about than ensuring they have an appropriate index for the benchmarking of their active manager portfolios. However, this low profile subject is worth a little more attention than it has historically received.
Assessing the 'governance gap'
November 2010 | Keith Knapman, Director, Investment Consulting; Graham Harman, Director, Capital Markets Research
A survey of the investment decision-making practices of Australian superannuation funds.
Blinded by the bite: Challenging the importance of tax in the active-passive choice
September 2010 | Raewyn Williams – Director, After-Tax Investment Strategies
This paper follows on from a series of Russell research papers advancing a framework for choosing between active and passive investment styles. This paper introduces an after-tax investing perspective and identifies key differences in how an after-tax focused investor should view the active-passive choice framework compared to a pre-tax investor.
Active Money
September 2010 | Scott Bennett, Portfolio Manager and Vivek Sondhi, PhD, Capital Markets Research Analyst
In this paper we review the concept of Active Money and how it can be applied in the Australian equity market to provide practitioners with a greater level of insight into the risk in Australian equity products. We also test the efficacy of Active Money as a predictor of excess returns and risk.
Global private real estate market overview
August 2010 | Martin Lamb, Director, Asia Pacific Real Estate Investment
Asian markets continue to shine with key developed markets like Singapore and Hong Kong reporting strong economies and solid real estate fundamentals. There is evidence in the US and European markets that there continues to be strong investor appetite for core, prime real estate. However, the overall view in the US and Europe is one of uncertainty as to how real estate fundamentals will be impacted by the fragility of their economies.
Mostly Brick
September 2010 | Bruce Curwood, Director, Investment Strategy and Don Ezra, Co-Chair, Global Consulting and Advisory Services
This paper is a pension fund case study with accompanying discussion questions designed to encourage dialogue with pension plan sponsors. It tells the story of the challenges facing a new Chief Investment Officer (CIO) as he takes the reins of the Colossal Pension Fund following Colossal’s horrendous performance in 2008. This paper concludes a three-part series by Bruce Curwood on the topic of risk management and governance.
Not yet a bonfire
September 2010 | Bruce Curwood, Director, Investment Strategy and Don Ezra, Co-Chair, Global Consulting and Advisory Services
Not yet a Bonfire picks up the pension fund case study two years later, and recounts some of the changes the CIO instituted during that period to address the challenges facing Colossal Pension Fund. This paper concludes a three-part series by Bruce Curwood on the topic of risk management and governance
Understanding factor risk: Uses & limitations
August 2010 | Symon Parish - Chief Investment Officer
Peter Ballantyne - Forecasting Analyst
The principal goal for every investor is to maximise returns while managing risk. This report examines the application of a technique called factor analysis. This technique may give a different and possibly deeper understanding of the association between the return patterns of asset classes or individual securities.
Investing in Volatility
July 2010 | Chris Inman - Senior Analyst,
Geoff Warren - Senior Lecturer, Australian National University
Various products deliver exposure to volatility as an investment in its own right, including VIX futures, variance swaps and managed volatility funds. This report reviews the nature of these products, and how they might fit into a portfolio. Volatility exposure can be used to either enhance returns through capturing the ‘volatility risk premium’ or hedge via exploiting a negative correlation with equity markets. An investor’s interest in volatility as an investment will inevitably depend on their circumstances.
Variability of Active Management: Australian and Global Equities
June 2010 | Nick Curtin, Senior Consultant
The latest active passive research paper finds that regardless of the arguments for and against the long-term potential gains, fundamentally, the returns to active management are variable through time.
Use of Australian iTraxx Contracts in Fixed Income Portfolios
June 2010 | Clive Smith, Portfolio Manager
In this paper, Russell’s Investments Division finds that the development of both the CDS and related iTraxx markets have provided fixed income managers with additional flexibility with respect to incorporating credit views within fixed income portfolios.
Does equity have a duration? And is that useful for LDI?
June 2010 | James Gannon, Manager, Investment Strategy & Consulting
In this paper we respond to these questions and discuss the key issue - that many defined benefit pension plans are seeking to implement a liability driven investing (LDI) hedging program by matching the durations and credit exposures of their asset portfolios to the durations and credit exposures of their liabilities.
Themes on ESG current practice: US and pan-European core real estate open-end fund managers
May 2010 | Tamara Larsen, Senior Research Analyst
In its effort to identify themes or trends in current ESG practice, Russell has conducted a series of interviews with institutional real estate private equity open-end fund managers of US and pan European “core” strategy funds, which comprise a subset of Russell’s real estate private equity manager research coverage. This Russell research paper presents the major themes that emerged.
Opportunistic private real estate: capitalising on the cyclical recovery
May 2010 | Ed Garcia, Portfolio Manager, Alternative Investments, Real Estate
This paper discusses the case for investing in opportunistic real estate after the crisis.
Active or Passive: An Australian Perspective
April 2010 | Nick Curtin - Senior Consultant
This paper applies the framework articulated in “When should you select an active alternative to passive investing?” (Ezra & Warren, January 2010) to the Australian investor context. We assess all of the major asset classes typically employed by Australian investors according to the framework and draw broad conclusions on an asset class by asset class basis.
Investment governance: a pragmatic update
March 2010 | Don Ezra, Co-Chair, Global Consulting
In a sense, there is nothing new to report on investment governance. It is part of the subject of governance in the wider sense, with the principles applied specifically to the governance of institutional investment portfolios.
Risk management is the cornerstone of investing
February 2010 | Bruce Curwood, Director, Investment Strategy - Canada
This second paper of a three-part series explores the major reasons many institutional investors have trouble managing risk and proposes a new way to think about risk management and governance.
There's nothing normal about risk
February 2010 | Bruce Curwood, Director, Investment Strategy - Canada
This first paper of a three-part series discusses several myths and facts about risk, as well as problems with existing risk models. One of its main purposes is to communicate the confusion and anxiety investors felt when the 2007 - 2009 financial crisis revealed unintended exposures in their funds.
When should you choose an alternative to passive investing?
January 2010 | Don Ezra and Geoff Warren
Russell Global Consulting practice sheds new light on active/passive debate. In this new research we identify five reasons why an investor may seek an alternative to a passive approach.
Active commodity investing
December 2009 | Nick Curtin
We believe that an institutional investor’s decision to allocate to commodities should be considered as part of the strategic asset allocation. As interest in commodities continues to gain momentum across the global investment community, investors are seeking to understand the options and the rationale for including commodities exposure in their portfolios. While the diversification benefits of the asset class are well known, investors considering the asset class do not always understand the potential advantages of active management. We will take a look at various inefficiencies in the market and explore how skilled managers might take advantage of them to add value to a commodities portfolio.
Strategic Tilting Idea: Investment Grade Credit
July 2009 | Andrew Pease and Geoff Warren
Global investment grade credit looks promising as a strategic tilting possibility. While our nominated signals are not yet fully satisfied, there is enough evidence to support an initial low-level position.
Value tilts for Australian equity portfolios
July 2009 | Geoff Warren and Kathy Cave
This report considers whether a tilt to value should be maintained in Australian equity portfolios, and how such a tilt may be implemented by a multi-manager investor. There is strong case for holding an ongoing bias towards value, providing there is capacity to bear occasional bouts of underperformance.
Home Bias? It's a Matter of Perspective
March 2009 | Geoff Warren
Home bias may not be as irrational as it first appears, once allowance is made for the influence of legacy, peer risk, and a decision structure that compares international and local counterparts as direct substitutes.
Strategic Tilting: What, if, when and how?
January 2009 | Andrew Pease
This paper outlines an investment philosophy for strategic tilting within portfolios. Strategic tilting aims to deviate from the long-term strategic asset allocation only when markets are at some unsustainable extreme.
Listed versus Unlisted: Substitutes or Complements?
December 2008 | Rob Pereira
Are assets such as property, infrastructure and equities better held in their listed or unlisted form? This report argues that the listed versus unlisted decision should not be approached as an "either/or" choice.
Structuring Your Property Portfolio
November 2008 | Rob Pereira
This paper considers how investors can best bring together different property types given their investment objectives, individual circumstances and the constraints of the real world opportunity set.
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