Institutional research

The effect of the term premium in a rising rate environment
Interest rates are widely expected to rise in the coming months and years. Some investors may feel that it is obvious how to position a portfolio in a rising rate environment. However, the question is more complex than it first appears. For example, what is the "term premium," and how does it affect portfolio positioning at a time when interest rates are expected to rise? How best to position a portfolio in a rising rate environment is not as obvious as it might seem. This Russell Practice Note describes how the existence of a term premium may stack the odds against those who bet on rising interest rates. NOTE: This Practice Note was first published in November 2013. This updated version includes an additional 27 months of data.
Bob Collie, Chief Research Strategist, Americas Institutional | Kendra Kaake, Senior Investment Strategist, Canada Institutional
March 2016 | Read article

Reshaping the Canadian Retirement System
Economic conditions, longevity and other risks related to defined benefit (DB) pension arrangements have left many private sector plan sponsors questioning the sustainability of the traditional DB model. Defined contribution (DC) arrangements have seen tremendous growth as a result, but they too have serious flaws. As a response, many jurisdictions in Canada are considering new pension structures aimed at combining and maintaining the attractive features of DB and DC while mitigating many of the flaws inherent in each.
Kendra Kaake, Senior Investment Strategist
March 2016 | Part 1: Motivation for Change | Part 2: Investing Strategically

Our approach to model currency
Research has shown the Canadian dollar is pro-cyclical. This means our currency should rise and fall in line with the global economy and global equity markets.
Russell Investments’ capital markets assumptions now include this relationship. To provide further enhancement, our modelling process also incorporates Carry, Value and Trend factors as drivers of currency returns. Russell Investments believes the risks inherent in currency exposure should be explicitly considered in conjunction with other international portfolio allocation decisions. For that reason, our forecasting system has been enhanced to incorporate the modelling of exchange rates over the long run.
Patrick Rowland, Director, Capital Markets Research | Peter Ballantyne, Senior Capital Markets Research Analyst
December 2015 | Read article

Governance process for evaluating sustainable investing
Whether or not to incorporate sustainable investing in your organization’s investment program is an important matter to address – and it has important governance implications. Having an established governance structure is essential in many respects.
Heather Myers, Managing Director, Non-profits | Manisha Kathuria, Associate Director, Non-profits
August 2015 | Read article

Investment outsourcing means insourcing best practices
Non-profit organizations are seeking strategic providers who can offer professional expertise, share fiduciary responsibility and improve governance.
Joseph Gelly, Managing Director & Head of Institutional Canada | Heather Myers, Managing Director, Non-profits | Adam Hornung, Senior Consulting Analyst
August 2015 | Read article

Enterprise risk in Canada
2014 was an eventful year for defined benefit (DB) plans in Canada. On the asset side, plan assets exceeded market expectations, experiencing double-digit returns on average. On the liability side, plan sponsors experienced larger-than-expected increases in their obligations, driven primarily by deceases in discount rates and updated mortality tables.
Kendra Kaake, Senior Investment Strategist
JUNE 2015 | Read article

To err is human – But smaller funds can succeed by mitigating cognitive bias
Mega funds have made the move to a more comprehensive approach to risk management. Will smaller funds be able to overcome the governance gap and cognitive bias to adopt these risk-managed approaches? This paper focuses on overcoming investor irrationality by mitigating cognitive bias.
Bruce Curwood, Director Investment Strategy
NOVEMBER 2014 | Read article

Defensive equity – Implementing a Canadian equity defensive strategy
Discussing investable options, particularly for niche investment strategies, is imperative to building an effective portfolio. This paper puts forward ideas on how to achieve this objective, and provide options for delivering real portfolio outcomes.
Adam Hornung, Institutional Investment Strategist
SEPTEMBER 2014 | Read article

Defensive equity – A defensive strategy to Canadian equity investing
The appropriateness of an allocation to defensive equity will depend on alignment of the objectives and risk tolerance of the asset owner. This paper takes a closer look at the merits of introducing a defensive position within a Canadian equity portfolio.
Adam Hornung, Institutional Investment Strategist
JUNE 2014 | Read article

Smart Beta – New study captures asset owner perceptions.
Russell survey finds "smart beta" adoption rates, drivers in usage underpin latest step in evolution of investment management.
APRIL 2014 | Read article

Understanding the effects of spending policies – A guide for non-profit organizations
Spending policies can also be designed to manage the tradeoff between certainty/uncertainty in the growth of asset base versus certainty/uncertainty in the stream of distributions.
Kendra Kaake, Senior Investment Strategist | Mary Beth Lato, Asset Allocation and Risk Management Strategist
DECEMBER 2013 | Read article

A forward-looking approach to strategic currency hedging
Canadian-based investors who believe that the Canadian dollar will continue to exhibit pro-cyclical behaviour can reduce equity volatility by retaining foreign currency exposure, especially to the US dollar. This paper addresses the starting point of a strategic currency policy ad examines whether a simple dynamic rule can enhance this static policy.
Kendra Kaake, Senior Investment Strategist
JULY 2013 | Read article

Investment outsourcing means insourcing pension management best practices
Plan sponsors are seeking strategic providers who can offer professional expertise, share fiduciary responsibility and improve governance. One of the most visible trends is widely known as outsourcing. Joseph Gelly, Managing Director & Head of Institutional Canada
Adam Hornung, Senior Consulting Analyst
AUGUST 2013 | Read article

Transition management: Eight guidelines for choosing a trusted provider
Choosing a transition management provider is a decision that can have significant financial consequences and understanding a candidate’s capabilities in risk management, project management, and trading is paramount. Yet there is another aspect of the plan sponsor’s decision process that is even more fundamental to choosing the right provider: trust.
Steve Kirschner, Managing Director, Transition Management
Travis Bagley, Director, Transition Management, Americas
AUGUST 2013 | Read article

Evaluating the selection process for determining the going concern discount rate
The going concern discount rate, although an important element of the funding decision, is not something that should have any effect on the investment decision. After all, it's just an assumption, whose primary use is to control the strength/weakness of the funding regime.
Kendra Kaake, Senior Investment Strategist
MARCH 2013 | Read article

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