Multi-manager investments, which Russell Investments helped pioneer in the 1980s, is "a specific implementation of the time", says Andrew Doman, the firm's recently appointed CEO in Tacoma, Washington.
By that he means multi-manager mandates are a means to an end for investors, not an end in themselves. Russell Investments is best known in Asia as a purveyor of multi-manager products, but Doman says the firm is returning to its roots as an investment consultant.
"We are recommitting to the consulting business because we always want to be on the investor's side of the table," he says.
By no means is this a repudiation of its multi-management products. By assets under management, Russell is the biggest multi-manager in the world, and Doman readily makes the argument for this approach. But in recent years the firm in Asia has tended to emphasise multi-management as opposed to its roots as an investment consultant, even in Japan, where it has a sizeable consulting practice.
Doman wants to adjust this balance, because the financial crisis has made apparent flaws in pension systems that Russell wants to address.
He joined the firm in February after a two-decade career at McKinsey & Co in London, where he built its asset management practice. He also has experience in his native Australia in healthcare and practiced as a doctor; he also served in the Australian diplomatic corps.
He cites Russell's innovative pedigree as why he agreed to join the firm, including its role in developing investment consulting and multi-manager products.
Now he says Russell is working on the next generation of innovation to help plan sponsors and individual pensioners deal with a series of problems that have been made obvious by last year's market turmoil. This includes evidence that, in the United States for example, members of defined-contribution plans have failed to save and invest enough for a long retirement. Nor has anyone figured out what to do with pensioner assets post-retirement.
Doman is not prepared to comment on the types of products Russell is cooking up but says they will be hybrids between insurance and asset management.
In the meantime, the firm has developed a service for pension funds and other liability-driven institutional investors that is meant to sniff out potential asset bubbles. It has developed 114 asset pairs, which can be tailored to meet the needs of clients in a variety of countries. For example, a Japanese client could look at domestic equities, bonds, currencies or derivatives paired with international (ex-Japan) counterparts; while an Australian client could look at asset pairs designed for an Aussie domestic and Aussie international portfolio.
The idea is to give local investors hints when certain asset pairs become misaligned. Russell can simply sell them the data, advise or interpret the data, or take fiduciary responsibility and implement trading or investment strategies on behalf of the client, says Doman.
"This is a way to identify a client's true risk appetite," he says. "Last year a lot of investors were caught with risks in their portfolio they didn't realise were there."