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Russell Research

In our capital markets research we share with you our latest thinking, to help you address the challenges you face today.

NEW  China’s paradigm shift: Why I’m (still) cautiously bullish about 2016 (PDF)
February 2016, Brian Ingram
Brian Ingram, President of Russell Investment Advisors, Shanghai, shares his views on the structural transformations that will shape China and its economy in the year ahead.

NEW  Bond Manager ESG Survey 2015: Summary of Findings (PDF)
December 2015, David Millen
We surveyed 79 bond managers from around the globe to assess how far those managers have formally integrated ESG factors into their methodology. This is a summary of the findings.

NEW  Are your investment managers swimming between the flags? (PDF)
October 2015, Stephen Hunt
Many investors rely on performance and glossy marketing as their main reasons for investing in a fund. We explain why investors can't take managers at face value.

NEW  Have your cake and eat it too (PDF)
September 2015, George Thomson
Understanding the purpose of your organisation and what type of investor you are is a great way to start a discussion on your investment programme. We suggest a framework to get the conversations started.

NEW  How to pick the winner of the Rugby World Cup : Tips from the investment world on selecting the winning team (PDF)
September 2015, Noah Schiltknecht
Could Russell’s Investment approach be applied to rugby? We take a look…

Investing for the long term: new models for success (PDF)
August 2015, Tim Noonan and Geoff Warren
What does it mean to be a long term investor? Find out what two of our conference plenary speakers had to say…

Enhance your returns through effective implementation (PDF)
June 2015, Shashank Kothare
Ideas to help you capture some of the most reliable and easiest sources of investment return.

Considerations for implementing sustainable investments (PDF)
June 2015, Nicki Ashton
Today, investors are faced with a number of options when determining how they want to implement a sustainable investing program. A variety of approaches can be considered, such as excluding companies involved in controversial industries, supporting the most sustainable companies, having a sharp focus on environmental, social, and governance (ESG) exposures, and using ownership to engage with companies...

How to find an investment manager who has the ‘X’ factor (PDF)
June 2015, Erik Ristuben
The world offers no shortage of competent investment managers. Many handle funds prudently, make pretty good decisions and deliver reasonable returns. But then there are a few who often outperform their industry peers or a particular market benchmark, or both year after year. They seem to have a special quality – an ‘x’ factor, but how might one find such an investment manager?

Russell’s operational due diligence review process (PDF)
June 2015
Russell is dedicated to evaluating the business, operational and compliance risks of managers hired, or those considered for hire, for Russell fund assignments. Operational due diligence complements our already extensive traditional manager research process and enhances manager selection and retention decisions. This research paper explains what our operational due diligence team does and how their findings are used.

Why is inflation a difficult problem to solve? (PDF)
December 2014, Leola Ross
How should one invest for inflation? Leola provides her thoughts on why it’s such a difficult problem to solve.

Smart Beta Guidebook (PDF)
October 2014, Tom Goodwin
In 2014 Russell Indexes celebrated 30 years of index creation. This guidebook provides an overview of Russell’s Smart Beta Indexes.

Transition management explained (PDF)
September 2014, Travis Bagley
Interest in transition management has been rising in recent times because it represents a significant source of cost savings, can positively contribute to total portfolio returns, and recent news has highlighted the lack of transparency and departure of some providers from the marketplace. This report explains what a pension fund should know about transition management, including how to mitigate costs and manage risks of transitioning assets.

Adapting responsibly to markets: How to do it, and what it takes to be successful (PDF)
September 2014, Rob Balkema, and Mike Ruff
While each investor is unique, all of our clients seek to solve core economic problems—and generate their required rate of return at a level of risk they can commit to. Unfortunately, investors want more certainty than they can afford and often need to take on more risk than desired in order to achieve that return. This is the fundamental tension in the risk/return trade-off.

Stability is the risk dimension of equity style (PDF)
September 2014, Barry Feldman
‘The Journal of Investing’ recently published a paper by Barry which tested the ability of Russell’s stability indexes to identify company risk. Three forward-looking measures serve as risk proxies: analyst forecast dispersion, company credit rating, and a model-based statistic called company expected life.

Drivers of investment management success for non-profit organisations (PDF)
March 2014, Heather Myers and Mike Ruff
Much has been written in recent years about the difficulties non-profit organisations confront as they seek to reach their investment return targets. This Viewpoint explains what practices are critical to the success of a non-profit organisation’s portfolio.

How do your investment committee meetings measure up? (PDF)
March 2014, Bob Collie
This Viewpoint focuses on investment committee meetings and the behavioural and organisational factors that can impede or obstruct their flow.

Dynamic downside protection (PDF)
March 2014, Tim Cook
The new risk-on risk-off world that we have experienced since the GFC has seen heightened fluctuations of volatility. In response, investors are seeking downside protection at a reasonable price. This paper references some commonly available strategies that come at a cost often considered prohibitive. We then highlight the Dynamic Downside Protection Strategy that Russell has been successfully running for the past three years. This strategy provides ongoing risk reduction to clients without the sacrifice to wealth compounding experienced in traditional hedging programs.

Emerging Markets: Opportunity or threat? (PDF)
February 2014, Graham Harman
The 21st century is supposedly unfolding as the Asian century and, more generally, as the time when emerging economies across the globe hit their stride, and “emerge”.

In praise of the Dutch pension yacht! (PDF)
February 2014, Don Ezra
This Russell Viewpoint examines how “collective DC” plans work, as well as why Ezra believes the collective DC yacht is the best pension vehicle.

Liquidity management: A critical aspect of a successful investment program for non-profit organizations (PDF)
October 2013, Manisha Kathuria and Heather Myers
Liquidity management is crucial, given highly volatile markets and increasingly complex investment options. The misalignment of a portfolio's liquidity profile with cash flow demands can lead to a liquidity squeeze. This problem is particularly challenging in stressed market environments, as demonstrated by the global financial crisis (GFC) of 2008. An efficient liquidity management program can help mitigate the challenge. This Russell Viewpoint discusses the various approaches and considerations for non-profit organizations looking to establish a holistic liquidity management program, including:

1. Establishing the cash flow expectations and requirements of the fund
2. Utilizing various approaches to achieve the required liquidity profile, and
3. Documenting and frequently monitoring the fund's liquidity profile.

Mission-related investing: How non-profits use investments to further their mission (PDF)
July 2013, Manisha Kathuria and Steve Murray
Non-profit organisations have always confronted challenges to the fulfillment of their missions. Recent complex financial market conditions have increased their challenges. While continuing traditional grant making practices, non-profits are increasingly looking to use their investments in a manner intended to maximise the social impact of their total assets, otherwise known as 'mission-related investing' (MRI).

This Russell viewpoint discusses MRI and how it fits in the sustainable investing landscape. It also lays out an implementation roadmap, addressing related concerns and considerations for a non-profit wanting to implement an MRI program.

The cycle of success: The cyclical nature of active growth investing (PDF)
June 2013, Tom Warburton and Curtis Yasutake
Investors are often reminded that past performance is not a good indicator of future results. This advice has proven to be true with respect to stocks, asset classes and, in our view, active management returns across capital markets cycles. We believe that chasing active management returns, or reflexively rotating from active to passive equities as a result of poor active returns, can be highly detrimental to investment returns in the long run.

An introduction to swaps (PDF)
May 2013, David Rae
The use of liability hedging techniques by pension plans has become increasingly popular over recent years. While not the only instruments, interest rate and inflation swaps are often used in the management of hedging solutions. The paper takes a detailed look at these instruments, the benefits of their use and the pension plans' required risk-management techniques.

Rates rising: Are they? What can you do? (PDF)
May 2013, Martin Boulanger
Steadily declining interest rates have provided bond investors with a significant tailwind for over twenty years. As yields have fallen, so prospective returns, and the potential for interest rate increases now seems all too real. In this paper we stress the need for investors to reassess rather than react and a number of strategies that are worth considering.

Active management of global equities: is it worth it? (PDF)
April 2013, Daniel Mussett
Steadily declining interest rates have provided bond investors with a significant tailwind for over twenty years. As yields have fallen, so prospective returns, and the potential for interest rate increases now seems all too real. In this paper we stress the need for investors to reassess rather than react. Reassess what to expect from global bonds in the future and their role within an investment portfolio. For those investors seeking protection in anticipation of rising yields, we suggest a number of strategies that are worth considering.

Rates rise, and you lose. Right? (PDF)
April 2013, James Gannon
Many defined benefit pension plan sponsors are concerned about the effects of increasing interest rates on their fixed income portfolios, and some are considering shortening the duration of those portfolios. A potential problem with this approach, which Bob collie identified in a paper last year, is that taking a shorter-duration position is unlikely to result in better performance, 'unless the expected (interest rate) increase is greater than the increase already priced into the yield curve. If such an increase does not occur, staying the course in a longer-duration portfolio is likely to be a plan sponsor's best approach. This paper updates Collie's analysis with current data.

Measuring the success of a managed volatility investment strategy (PDF)
March 2013, Bob Collie
A new breed of investment mandates is growing in popularity. In this paper, we focus on one: how to report investment results in a managed volatility investment strategy. We discuss the implications of this approach and that multi-asset mandates need metrics that fit the specific objectives in mind, and that no single metric is necessarily sufficient to capture all of the goals of a multi-asset mandate.

Falling interest rates cause further damage to the pension world's $20 billion club in 2012 (PDF)
February 2013, Aran Murphy
Two years ago, we introduced the $20 billion club, made up of the U.S.-listed corporations that have worldwide pension liabilities in excess of $20 billion. These corporations represent roughly 40% of the pension assets and liabilities of all U.S.-listed corporations, and give a window into the condition of the wider corporate pension plan universe. Despite strong asset performance, the funded status of these plans deteriorated in 2012: the combined net pension shortfall rising from $182 billion to $220 billion.

T Standard implementation shortfall: Does it force trading faster than optimal? (PDF)
January 2013, Aran Murphy
An established measurement for the all-in costs, explicit and implicit, of a transition event is the Russell pioneered T Standard. The performance metric at the heart of the T Standard is a form of implementation shortfall that uses the portfolio value at the prior night's close as a reference point. Some observers are concerned that the T Standard creates an incentive to trade a transition quickly, since the risk of large market movements increases with time elapsed.

Strategy primer: Private capital (PDF)
November 2012, Brett Deits and Leola Ross
The market for private companies has significantly evolved over the years and become increasingly complex, and thus more difficult for investors to navigate successfully. The management of a private capital portfolio requires not only a deep understanding of the broad financial markets, but also deep relationships, given that returns often stem from investments in privately held companies or assets, whose financial information is inherently not available to the general public. In this primer we provide background for investors new to the private capital space and explore a number of unique characteristics and attributes.

Updated: Seven attributes of an excellent defined contribution plan (PDF)
November 2012, Josh Cohen and Ben Jones
When trying to evaluate key characteristics of a retirement plan, it is common practice in the defined contribution (DC) industry to ask, "How does our plan compare to other plans?" Plan sponsors and their advisors then benchmark their plans versus industry averages to see how their plans measure up. Is that what we should be striving for? Should being average, or slightly better, be our goal? This paper describes the following seven key attributes that we believe all excellent DC plans share and the actions you can take to help make sure your plan is positioned for excellence.

The investment case for emerging marketing debt (PDF)
August 2012, Yoel Prasetyo and Maniranjan Kumar
There are compelling reasons to consider emerging markets debt (EMD) to a fixed income portfolio. This paper discusses changes in the nature of the market and the underlying emerging market economies.

A case for high-yield bonds (PDF)
August 2012, Yoshie Phillips
High yield bonds have historically produced an equity-like return with a materially lower volatility. This paper presents the case for including high yield in portfolios.

The evolution of real assets: A fresh look at a rediscovered asset class (PDF)
August 2012, Leola Ross, Mark Teborek and Darren Spencer
Real assets are an increasingly relevant and important part of the global economy. However, many investors are often underinvested in real assets relative to their size in the total market portfolio and relative to the investors' own exposures to price increases.

Active management update - Second quarter 2012 (PDF)
August 2012, Rachel Carroll
In a reversal from the first quarter of the year, active managers faced headwinds during the second quarter. With concerns about the stability of the euro and the possibility of a Greek exit from the currency, investors were once again more focused on external factors and less on actual stock fundamentals.

Still overpaying for FX? (PDF)
July 2012, Lloyd Raynor
Historically, many institutional investors overlooked the fees they paid for transacting foreign exchange (FX). In this paper, we present research indicating that FX costs are too high. It could be time to give this area more attention!

2012 Global Survey on Alternative Investing (PDF)
June 2012
Russell has published this Survey biennially since 1992, which gives it one of the longest tenures of any survey of its kind in the financial services industry. Over the years, we have captured themes, trends and the perspectives of thousands of institutional investors around the globe. In this dynamic industry, we believe our surveys provide a clear lens through which to view the changing nature of alternative investments in a growing multi-asset investment landscape.

Benchmarking private equity: Getting though the maze (PDF)
June 2012, Vikrant Gupta
This paper discusses the benefits and limitations of some popular statistics used to measure private equity performance. 

Active of passive management in defined contribution plans? (PDF)
May 2012, Daniel Gardner
It doesn’t have to be either/or. Defined contribution plan sponsors are wondering which makes best sense for their plans—active management, or passive. This paper explores four points we believe are worth considering in the very important active/passive decision.

Fixed Interest investing in a low yield environment(PDF)
May 2012, Noah Schiltknecht
We may be in the final innings of what has been a tremendous three-decade run for debt markets. Investors have benefited from the persistent decline in yields, making fixed income amongst the top performing asset classes over this time frame. This paper discusses key themes that should frame how investors think of fixed interest in the future.

The case for tactical trading for Non-Profits (PDF)
March 2012, Mark Raskopf and Darren Spencer
The correlations of multi-strategy and long/short equity hedge funds to other asset classes may move higher during episodes of market volatility and in market downturns. Knowing this, what potential role can investors expect tactical trading to play in a diversified hedge fund strategy?

Global Cleantech - quantifying its place in your portfolio (PDF)
March 2012, Sam Porath
Cleantech is a sector which is attracting growing interest from institutional investors, governments, corporations and public funds around the world. This paper presents breakeven analysis which provides a quantitative framework for investors decding whether to allocate to global equity sectors.

Managing risk in investing with larger, brand-name investment managers (PDF)
February 2012, Dianna Zentner
This paper discusses four myths and realities about due diligence as it concerns large investment managers. This is a first step toward developing a more comprehensive, consistent, systematic operational and compliance due diligence program to evaluate all of your investment managers.

The implications for bond prices of changes in interest rates (PDF)   January 2012, Bob Collie
There is a direct relationship between interest rates (the yield curve) and bond prices. However, because a certain degree of interest rate change is already priced into the market, the relationship is not as simple as "if yields go up, bond prices fall, and vice versa". How should investors take account of this as they make investment decisions?

Choosing investment risk systems (PDF)
January 2012, Thomas Gillespie and Bruce Curwood
Choosing investment risk systems to meet requirements, and make it a productive part of the investment process can be like navigating minefield. This paper will provide guidance to investors who are choosing a risk system to measure and monitor investment risk.

Downside Protection - a practical pre-transition solution (PDF)
January 2012, Adam Van Ness and Tom Fletcher
Spikes in volatility and the continuing debt crisis in Europe have heightened tensions in the pension's world. The increasing volatility, coupled with decreasing equity return expectations, has come at a time of record low bond yields and funding concerns among many pension funds. With corporate, industry and government funds alike considering de-risking strategies, many observers comment that this may not be the most optimal time to be reducing equity assets and the potential time it may take to develop a comprehensive transition strategy may be prohibitive. But what other alternatives are there? Though one can attempt to increase returns by capturing the premiums associated with long volatility options strategies, one alternative to transitioning equity assets considered here is "Downside Protection".

Insights for evaluating active management (PDF)
December 2011, Don Ezra
The traditional presentation of managers' returns from active management over different time periods does not inform investors of the entire performance story, and can lead to the wrong conclusions being drawn regarding the performance of an active manager. A key flaw is that the relative performance in previous periods can often be concealed by the use of a common end-point for all statistics. In this paper, Don Ezra assesses the benefits of evaluating excess returns through additional performance dimensions such as the success ratio: the proportion of the investment period in question that a portfolio manager earned positive excess return. A new perspective on an old, but still very relevant, theme.

Strategies for large pension plan contributions (PDF)
December 2011, Justin Harvey
Many pension plan sponsors will make larger contributions to their pension plans in 2012 than they have in previous years. Russell expects most sponsors to allocate their contributions in one of three ways. This paper includes a description of each allocation approach - including their respective advantages and disadvantages - and looks at contribution timing issues.

Risk control strategies for Super Funds (PDF)
December 2011, Thomas Gillespie and Graham Harman
Superannuation funds need not be fully exposed to volatility and draw downs in risk assets. This research demonstrates that both derivative based hedges and dynamic asset allocation strategies can be used to offer fund members more stable long term returns and hedges for risk assets in periods of significant dislocation.

Dropping the Pilot - do you need a strategic asset allocation? (PDF)
November 2011, Graham Harman and Migara Alles
What type of Asset Allocation process is right for your fund? This research paper sets out a road-map for investors, explores the range of options available, and shows how the choice of asset allocation approach can be related to your investment beliefs, risk tolerance and governance structures.

Overcoming the limitations of traditional fixed income benchmarks (PDF)
October 2011, Clive Smith
The last decade has seen material shifts in the composition of issuance in fixed income markets as countries have gone from booming economies with lower levels of government borrowing, to recessions with governments having to effectively internalise a proportion of private sector debt. Such compositional shifts have highlighted the deficiencies in traditional fixed income indices. The aim of this paper is to discuss these deficiencies and to propose one potential alternative approach for investors when considering benchmarking fixed income portfolios.

What's the right savings rate? (PDF)
August 2011, Daniel Gardner & Josh Cohen
Give your participants a place to start - Target Replacement Income rate multiplied by 30%. Simply put: TRI 30. Defined contribution plan sponsors have helped their participants understand the need to save for retirement and encouraged plan participation through education and plan design features like auto enrolment. But participants still struggle with how much to save. This paper provides DC plan sponsors with a practical approach - TRI 30 - to guide participants towards appropriate individual savings rates.

An unintended currency exposure: behavioural causes & solutions (PDF)
August 2011, Bruce Curwood, Tom Lappalaienen & Ian Toner
Many portfolios' allocations to international securities contain unintended and often half-managed exposures to currency market risk. We identify the behavioural reasons behind this outcome, and propose a framework for better addressing the issue.

Assessing investment managers' business, operational and compliance risks (PDF)
August 2011, Dianna Zentner
Investors are familiar with research and due diligence focused on money managers' investment risks, but what about managers' non-investment risks?

The volatility paradox: When winners lose & losers win (PDF)
July 2011, Bob Collie
Can an investment strategy have a positive expected return, but actually tend to lead to a loss of wealth?

Elements of a clearly defined investment policy statement for NFPs (PDF)
June 2011, Greg Coffey
This paper summarises what an investment policy paper is, the elements it should include, and why it is important for a NFP to have a well-defined government document.

Defensive equity: Is the market mispricing risk? (PDF)
June 2011, Bob Collie & John Osborn
This paper discusses a defensive equity strategy which offers the possibility of a reduction in portfolio risk and a more attractive trade-off between risk and reward.

Structuring a listed infrastructure portfolio (PDF)
May 2011, Adam Babson
This paper discusses the risk, return and diversification characteristics infrastructure offers (as a real asset category) distinct from those of other asset classes.

How defined benefit plan sponsors think about risk management (PDF)
May 2011, Bruce Curwood & Don Ezra
This paper has its origins in an experimental workshop "Risk management: An interactive case study" conducted at the 2011 Russell Institutional Summit held in US.

Structuring a private real estate portfolio (PDF)
April 2011, Leola Ross & John Mancuso
With a multitude of options available to investors, real estate investments today can be tailored to specific portfolio goals and constraints.

Conscious Currency: A new approach to understanding currency exposure (PDF)
March 2011, Ian Toner
When it comes to currency exposure, investors are generally well versed with the concepts and applications of hedging. However, with currency exposure recently becoming a major issue in the US, fresh analysis has raised some intriguing insights into the nature of currency exposure.

Integrating Environmental, Social and Governance (ESG) issues: Russell's manager research and sustainable financial value (PDF)
February 2011, Will Pearce & Mike Clark
Investors are showing an increasing interest in ESG issues. This paper draws out the difference between a values-based approach and the concept of sustainable financial value, and discusses how this distinction can help inform an investor as they seek to specify their objectives.

Aspects of good governance (PDF)
February 2011, Don Ezra, Sorca Kelly-Scholte & Shashank Kothare
At first glance, the title of this paper appears modest, but our choice is deliberate. This was one of the lessons we learnt from a series of roundtable conversations we held in Europe in October 2010 with trustees and senior staff of large pension schemes on the general subject of investment governance.

Global private real estate market overview (PDF)
August 2010, Martin Lamb
Asian markets continue to shine with key developed markets like Singapore and Hong Kong reporting strong economies and solid real estate fundamentals. There is evidence in the US and European markets that there continues to be strong investor appetite for core, prime real estate. However, the overall view in the US and Europe is one of uncertainty as to how real estate fundamentals will be impacted by the fragility of their economies.

Investing in Volatility (PDF)
July 2010, Chris Inman & Geoff Warren
Various products deliver exposure to volatility as an investment in its own right, including VIX futures, variance swaps and managed volatility funds. This report reviews the nature of these products, and how they might fit into a portfolio. Volatility exposure can be used to either enhance returns through capturing the 'volatility risk premium' or hedge via exploiting a negative correlation with equity markets. An investor's interest in volatility as an investment will inevitably depend on their circumstances

Risk management is the cornerstone of investing (PDF)
February 2010, Bruce Curwood
This second paper of a three-part series explores the major reasons many institutional investors have trouble managing risk and proposes a new way to think about risk management and governance.

There's nothing normal about risk (PDF)
February 2010, Bruce Curwood
This first paper of a three-part series discusses several myths and facts about risk, as well as problems with existing risk models. One of its main purposes is to communicate the confusion and anxiety investors felt when the 2007 - 2009 financial crisis revealed unintended exposures in their funds.

The Active versus Passive decision for New Zealand investors? (PDF)
February 2010 Craig Ansley
Don Ezra and Geoff Warren have constructed a new framework for deciding between active and passive management, ("When should you choose an alternative to passive investing?", January 2010). This paper applies their framework to the New Zealand context, drawing broad conclusions on an asset class by asset class basis.

When should you choose an alternative to passive investing? (PDF)
January 2010 Don Ezra & Geoff Warren
Russell Global Consulting practice sheds new light on active/passive debate. In this new research we identify five reasons why an investor may seek an alternative to a passive approach.

The re-discovery of real assets (PDF)
April 2009, Leola Ross
Real assets, such as real estate, commodities and infrastructure, may improve portfolio performance for many investors. While historically a typical storage of wealth and currently a material portion of the global economy, real assets diversify each other and an equity/bond mix, and they offer the potential for attractive levels of return. Adding real assets to an existing equity/bond mix may materially improve the ability of a portfolio to dominate inflation over the long term.

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Global CIO Jeff Hussey discusses the expanding nature of multi-manager investing.