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Multi Manager
The Third Dimension in Russell's Investment Approach
Why do you need more than one investment manager?
Evidence shows that no one investment manager with their investment style will always be a top performer. As investment styles move in and out of favour, so too do a manager's returns. We use a manager-of-managers approach, selecting and monitoring some of the most talented investment managers in the world. No matter which asset or style is in favour at any given time, this complementary blending of managers may reduce your risk and help provide more consistent returns through all kinds of market cycles.
Manager research is the core of our business today. Each year, through an integrated worldwide network of more than 101 analysts, we evaluate more than 4,000 investment managers and 4,500 investment products globally.
Our analysts hold approximately 4,500 research meetings annually to study each manager's quantitative and qualitative approaches. They use extensive research to find the best 680 managers who are then subject to further scrutiny. Additional research leads to decisions about which 180 out of 4,000 managers will ultimately be selected for managing Russell funds. Using various proprietary factors, Russell determines which managers are currently adding value in their style through superior processes and exceptionally talented individuals.
These main factors include:
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- Performance Indicators — Which style and investment techniques and organizational traits best support potentially superior manager performance.
- Stability — Which manager teams and organizations will have the lowest turnover.
- Superior Environments — Which organizations are most likely to produce above-average returns.
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Russell evaluates these factors, covering regional and multicurrency products in all major equity and fixed-income markets:
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- Equities (single country, emerging markets, and global/international)
- Fixed income (single currency, multicurrency, and convertibles)
- Global and domestic asset allocation
- Currency strategies
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Selecting the Best
Because research confirms that past performance is not predictive of future performance, Russell's approach gives the most weight to the value of the manager's investment process and the strength of the manager's organization.
The following illustration compares Russell's selection criteria to the competition.
Picking Today's Hot Manager Isn't the Solution
To be on top one year, a manager may take a lot of risk — risk that is just as likely to land them on the bottom in the following years. Our goal is to select managers who have historically performed better than average on a consistent basis. If you simply pick today's top manager for your investment, you may not be prepared for the long run. This chart shows why.
Managers in the Canadian Equity Universe in the top Quartile for consecutive years: Dec. 31, 2001 - Dec. 31, 2005
Source: Morningstar Canada
In 2001, 121 managers composed the top quartile, or top 25% in the Canadian Equity Universe. Of those, only one manager remained in the top quartile for five years straight.
Testing Our Theories
Russell's research analysts use an unmatched, proprietary database of qualitative and quantitative characteristics to identify managers most likely to outperform their benchmark indexes and their peers.
The following table includes some of the characteristics that Russell analyzes for each of these managers.
| Qualitative |
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Quantitative |
| Organization and Processes |
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Performance against peer groups |
| Investment philosophy |
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Performance against benchmarks |
| Decision-making procedures |
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Risk-adjusted attribution |
| Economic and securities research |
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Portfolio characteristics |
Continuously Monitoring Managers
Many changes can occur in funds, and investors aren't always aware of them. A manager may leave a firm, or a manager might alter their investment style unexpectedly. For these reasons, Russell continuously monitors its managers to make sure they stick to their assignment, replacing them if necessary. This way, your investment stays on track with your goal.
Russell's continuous research approach also helps keep the money manager turnover rate normally in the low 7% to 10% range, which keeps costs down. Other approaches are susceptible to much greater turnover rates because they are driven by performance, which is inherently volatile.
Find out how you can implement Russell's Investment Approach.
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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 2008. All Rights Reserved.
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