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Pioneering the Multi-Manager Approach
The Russell Investments Story
Canadian investors may know Russell Investments as the people behind the Russell 2000® Index — the best-known benchmark of US small-cap stock performance. So people are surprised when I tell them that Russell is also one of the world's leading investment managers, providing financial planning and mutual funds to individual and institutional clients in 35 countries around the globe.
As of today, our investors — both the smaller individual accounts and the huge institutions — have entrusted Russell with more than $200 billion in assets. And no wonder. Our shareholders know that we've been studying the world's money managers for nearly 30 years. We've pioneered a unique multi-manager investment process that allows us to choose from the "best of the best," creating globally based fund portfolios headed by some of the most capable investment professionals in every segment of the market.
In short, we not only diversify our investments, we diversify our investment managers as well. This multi-manager process allows Russell to put together counter-cyclical investment styles which can result in lowered volatility, while still offering potentially above average returns for our clients. In fact, I strongly believe that within a relatively short period of time, investing with a single manager will seem as strange to investors as owning a portfolio consisting of a single stock.
Russell investors strive for stability
In the past year, it has become obvious to everyone that we live in very unpredictable times. The markets are changing, and the road ahead may turn out to be extremely rocky for even the most experienced investment managers.
Fortunately, Russell's philosophy is to take a long-term view. We make money not by chasing performance, but by seeking consistency. Not surprisingly, we've found that the less volatile a fund's return, the less uncertainty for the investor. Our goal — and one that we have carried out year in and year out — is to provide a stable yet competitive return.
Diversification: The heart of the Russell approach
Compared to the daring bets of the market timers, the Russell approach is what I would call "non-heroic." We believe in simply — and successfully — diversifying across all of the sectors in the market.
Our strategy starts at the asset class level. We first diversify across multiple asset categories — stocks, bonds, etc. — and then move into style diversification within each asset category. Finally, we carefully select outside investment managers within each style. Again, the objective of all of this diversification is to produce greater consistency, and less uncertainty, of returns.
Why diversify within an asset class? Because categories themselves can be quite volatile. There are bull and bear markets even within a single sector, like US equities or international bonds. By picking managers with different styles that perform cyclically with one another, we strive to further reduce the variability within that class in order to achieve a more consistent return for the whole portfolio — and for our investors.
Your responsibility as an investor
At Russell, we offer every client — from the largest institution to the smallest shareholder — the same quality product, experienced advice and proven performance. But we also ask our investors to meet us partway.
We have found that the most important trait an investor can have is patience. Investing isn't about entertainment or excitement. It's about saving for retirement, affording major life events, buying a home, raising a family. Thus, patience is more than simply a virtue; it's a necessity.
Russell is a company that has been in this business for an extremely long time. We have watched our competitors try to emulate our processes; we have witnessed hot funds both come and ultimately go. As financial planners, we've always found that the best investment advice is the simplest: Allow your portfolio to work for you over a decent time horizon. Have a rational investment process. And most importantly, don't change your portfolio too quickly or too radically.
Over the past few months, I think we have all learned that there is enormous risk in simply looking at a sizzling industry or market sector. If nothing else, history has shown us that stocks that have recently performed well don't necessarily perform well in the future. And the future is where Russell — and our investors — are firmly headed.
Editor's note: Russell conducts a rigorous manager research process and provides a select set of top-rated investment managers for clients. Russell continually evaluates and re-evaluates investment managers to ensure that our clients receive comprehensive and strategic diversification. We believe that diversification through multiple asset classes, multiple styles, and multiple managers will enhance long-term performance while managing risk.
The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity. For information regarding such investments, contact a financial professional.
Past performance is not a guarantee of future results.
Copyright© Russell Investments Canada Limited 2001. All rights reserved. See 'Important Legal Information.' Date of first use: 02/09/01. This is a publication of Frank Russell Company. It should not be construed as investment, legal, or tax advice. The contents are intended for general information purposes only, and you are urged to consult your own investment, legal, or tax advisor concerning your own situation and any specific investment questions you may have. For further information about these contents, please contact Russell Investments Canada Limited.
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Products and services described on these websites are intended for Canadian residents only. Information on these sites should not be considered a solicitation to buy or an offer to sell a security to any person. Persons outside Canada may find more information about products and services available within their jurisdictions by going to Russell's worldwide site, http://www.russell.com.
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© Russell Investments Canada Limited 2009. All Rights Reserved.
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