Russell: Markets return to rewarding fundamentals over fear
Active management advantage reasserted
SINGAPORE, October 15, 2009 - Skilled active investment managers are emerging from the toughest recessionary environment in a generation and are adding value to equity and fixed income portfolios. Symon Parish, Chief Investment Officer Asia-Pacific for Russell Investments, noted that not only are many of the more than 400 Russell multi-manager funds worldwide performing above benchmark year-to-date, but 2009 also currently ranks as an exceptional period for active managers generating above the benchmark returns.
"Fear no longer dictates the markets, and fundamentals have begun to matter again. We are now in an environment where skilled stock-picking by active investment managers adds value," said Parish. "The market is rewarding companies based on price, earnings, sales and other fundamental measures that differentiate the winners from the losers, so the opportunity for active management remains significant."
Since the current market bottom on March 9 of this year, Russell's Emerging Markets Fund, for example, has outperformed its benchmark by 1245 basis points through September 30. Similarly, the Russell Global Equity Fund outperformed its benchmark by 167 basis points, the Russell Investment Grade Bond Fund by 807 basis points and the Russell Investment Strategic Bond Fund by 1257 basis points during the same time period.
"Looking across our complex worldwide, we are feeling a sense of normalcy about the value of active management," Parish said. "We see an investment approach that stayed the course through an extraordinary market event and came out of it with our value proposition intact."
He added that in the build-up to the market collapse and in its aftermath, the market simply did not care about the value of individual stocks and gave investors practically no opportunity to discriminate between the winners and the losers. But all of that has changed in recent months with an increase in performance differential between stocks (Research paper - "Going forward, why you still want an active management strategy") and a continued shift toward a fundamentals-driven market.
"We've observed that during periods of high performance differential, managers who select outperforming stocks versus the benchmarks can be rewarded beyond normal expectations," said Parish. "Even still, the active managers that succeed always need more than volatility across sectors and within sectors. In constructing its multi-manager funds, Russell looks for active managers that are highly engaged and highly skillful and that have a clearly definable investment process that is executed with discipline."
Parish added that as the equity markets once again offer skilled managers with opportunities to add value, Russell's Investment Division also emerges from the recessionary period with a restructured and streamlined operation globally with several key personnel shifts and additions as well as an intense review of risk management and oversight procedures.
"We've built our portfolio structure in a way that aims to ensure global consistency of process, points-of-view, innovation, performance, operating standards and accountability," said Parish. "We've also organized around asset classes and solution sets. This approach strengthens our investment deliverable and allows us to build on our core strengths, while also recalibrating our model to allow us to function more efficiently within the global capital markets."
Performance information is historical and does not guarantee future results. Investment return and principal value will fluctuate so that redeemed shares may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Current to the most recent month-end performance for Russell mutual funds is available by visiting: www.russell.com/us/fundperformance.
| Class S Shares | 09/03/09 - 30/9/09 (%) | as of Sept 30, 2009 (%) | Incep to date (%) | Total Annual Fund Operating Expenses | ||
| 1 yr | 5 yr | 10 yr | ||||
| Russell Emerging Markets Fund | 104.01 | 19.17 | 17.20 | 11.49 | 1.62 | |
| MSCI Emerging Markets Index Net | 91.56 | 19.07 | 17.31 | 11.38 | ||
| Russell Global Equity Fund¹ | 67.87 | -1.75 | -9.3 | 1.32 | ||
| MSCI World Net Dividend Index | 66.2 | -2.29 | -8.17 | |||
| Russell Investment Grade Bond Fund² | 15.06 | 13.83 | 4.51 | 5.9 | 0.58 | |
| Barclays Capital U.S. Aggregate Bond Index | 6.99 | 10.56 | 5.13 | 6.30 | ||
| Russell Strategic Bond Fund³ | 19.59 | 11.91 | 4.1 | 5.75 | 0.82 | |
| Barclays Capital U.S. Aggregate Bond Index | 6.99 | 10.56 | 5.3 | 6.30 | ||
¹ The Russell Global Equity Fund inception date was 03/01/2007
² The Fund first issued Class S Shares on October 22, 2007. The returns shown for Class S Shares prior to that date are the returns of the Fund's Class I Shares.
³ The Fund first issued Class S Shares on Sept 2, 2008. The returns shown for Class S Shares prior to that date are the returns of the Fund's Class I Shares.
About Russell
Russell Investments is a global investment company with $174 billion in assets under management as of September 30, 2009. Russell serves individual, institutional and adviser clients in more than 40 countries and provides investment solutions including mutual funds, retirement investments, institutional asset management, implementation services and global stock market indexes. Russell is world-renowned for its depth of manager research, quality of manager selection and access to some of the world's leading investment managers. It helps investors of all sizes put this access to work in corporate defined benefit and defined contribution plans, and in the life savings of individual investors.
Founded in 1936, Russell is a subsidiary of Northwestern Mutual Life Insurance Company.
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Russell Investment Group is a Washington, USA corporation, which operates through subsidiaries worldwide, including Russell Investments, and is a subsidiary of The Northwestern Mutual Life Insurance Company.
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Louise Humphreys
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