Russell Launches New Standards To Measure Performance Of Transition (Russell.com)

Russell Launches New Standards To Measure Performance Of Transition
Prevents TM Providers Disguising 'Bad' Outcomes

AUCKLAND, 28 May 2004 — Russell Investment Group is encouraging New Zealand funds to adopt new global standards to calculate the performance of institutional investment portfolios during a transition. Dozens of transition providers, fund executives, consultants and industry bodies around the globe have been involved in a cooperative consultation since late last year, when Russell issued a public call for a common set of performance calculations.

Transition management is a strategic tool for reducing clients' risks and costs when restructuring their equity portfolios. The standard, which is becoming known as the "T standard," moves the methodology for measuring portfolio transitions closer to the methods used to measure long-term investment management mandates. Investors will benefit as results will be shown from their perspective, not that of the transition manager.

"There is now a common basis of measurement across all types of transition provider and transition approach, and there is reassurance that an objective standard has been applied," said Russell New Zealand's Managing Director, Edward Schuck, PhD.

Schuck said that the response from the institutional investment community had been positive and had allowed rapid progress since the original call for action.

"We absolutely need a common standard," Schuck said. "It's unacceptable that, for the same event, one firm can come up with one performance number and another firm calculates a different one."

"How a fund evaluates its transition and whether that performance was good or bad is a matter of judgment. But the number and the underlying calculation for that number should not be up for debate. The institutional investment industry demands a consistent standard."

The $106 billion CalSTRS fund in the United States, the fifth largest pension fund in the world, is just one of the funds that will be adopting the proposed standard as its permanent measure of transitions.

Russell believes a range of funds in the New Zealand and Australian marketplace will also adopt the new standards when undertaking their next transition.

Schuck said the key to reaching agreement had been to concentrate on the outcome experienced by the investor, rather than the actions taken by the transition manager. This represented a change of focus for most.

"Not every aspect of a transition is under the transition manager's control. Some are still nervous about the fact that the standard will present everything to the client, whether it is really attributable to the transition manager or not," Schuck said.

"But that's the only way to move forward. We show the outcome, warts and all, and then allow the client and transition manager to interpret that outcome as best they can. This will lead to a much higher quality of analysis. Any other way makes it too easy to disguise a bad outcome."

A copy of the full paper "T-Standards" is available at www.russell.com/nz.

About Russell
The Russell Investment Group, a global investment services firm, provides multi-manager investment products and services in more than 35 countries and has been researching investment managers for more than 30 years. Worldwide, Russell manages over NZ$149 billion in assets and advises clients representing approximately $3.0 trillion.

In New Zealand, Russell advises on more than NZ$13 billion in assets and invests around NZ$1.0 billion for New Zealand investors in Russell Funds.

Founded in 1936, Russell is a subsidiary of Northwestern Mutual and is headquartered in Tacoma, Washington, USA with additional offices in New York, Toronto, London, Paris, Amsterdam, Singapore, Sydney, Auckland, Tokyo and Johannesburg.

The information contained in this publication was prepared by Russell Investment Group on the basis of information available at the time of preparation. This publication provides general information only and should not be relied upon in making an investment decision. Investors should seek professional advice which takes into account their personal circumstances before making an investment decision. Accordingly, none of Russell Investment Group, Russell Investment Management Limited, nor their directors, will be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this document. None of Russell Investment Management Limited, nor any member of the Russell Investment Group, nor their directors, guarantee the investment or the returns on the investments through Russell Funds.

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