WEBVTT - Managing the Shift from Pensions to 401k with Zach Buchwald 0:00:02.520 --> 0:00:11.840 Bloomberg Audio Studios, podcasts, radio news. This is Masters in 0:00:11.920 --> 0:00:15.440 Business with Barry Ritholts on Bloomberg Radio. 0:00:17.079 --> 0:00:20.240 This week on the podcast, I have yet another extra 0:00:20.280 --> 0:00:24.599 special guest. Zach Buckwold is chairman and chief executive officer 0:00:24.600 --> 0:00:28.040 at Russell Investments. They run about three hundred and seventy 0:00:28.080 --> 0:00:31.800 billion dollars. I found this to be a fascinating conversation. 0:00:32.520 --> 0:00:35.400 Russell has been at the forefront of a number of 0:00:35.440 --> 0:00:42.160 really interesting innovations indexing and outsourced CIO and smart beta. 0:00:42.320 --> 0:00:45.760 They were way ahead of the rest of the investment world. 0:00:46.280 --> 0:00:52.360 Now they're putting together really interesting active portfolios, including private investments. 0:00:52.960 --> 0:00:56.800 They work with both wealth clients as well as institutions. 0:00:57.640 --> 0:00:59.680 You may not know Zach's name, but he's got an 0:00:59.680 --> 0:01:04.679 appolutely fascinating background at Blackrock, Morgan Stanley and Lehman Brothers. 0:01:04.959 --> 0:01:07.560 I thought this conversation was fascinating, and I think you 0:01:07.600 --> 0:01:11.360 will also with no further ado, my conversation with Russell 0:01:11.440 --> 0:01:17.600 Investments Zach Buckwald. Zach Buckwald, Welcome to Bloomberg. 0:01:17.800 --> 0:01:19.360 Delighted to be here, Barry, thanks for having. 0:01:19.240 --> 0:01:21.440 Me, Thank you so much for joining us. I spoke 0:01:21.520 --> 0:01:25.160 to your predecessor about three years ago, right after the pandemic. 0:01:25.640 --> 0:01:28.800 But let's start talking a little bit about your background. 0:01:29.440 --> 0:01:33.000 Undergraduate bachelor's degree at Harvard, what were you studying. 0:01:33.319 --> 0:01:35.800 I studied English, So this was not on the docket 0:01:35.840 --> 0:01:37.240 that I was going to have a career in finance. 0:01:37.319 --> 0:01:40.480 Not the plan. Huh. So you come out of school 0:01:41.520 --> 0:01:43.360 in ninety six, what was your first gig? 0:01:43.440 --> 0:01:45.920 So out of school, I applied to law school, not 0:01:45.959 --> 0:01:48.080 sort of knowing where I was going, and I decided 0:01:48.080 --> 0:01:51.000 to have a little break before I went back to school, 0:01:51.040 --> 0:01:53.920 and I got recruited by Lehman Brothers. So I spent 0:01:54.480 --> 0:01:58.160 two years working in structured finance at Lehman Brothers. 0:01:58.160 --> 0:01:59.800 And it became apparent to me right away. I didn't 0:01:59.800 --> 0:02:00.640 want to become. 0:02:00.520 --> 0:02:03.160 A corporate lawyer because I worked with lawyers and that 0:02:03.240 --> 0:02:04.280 was that was not the job for me. 0:02:05.000 --> 0:02:06.640 But I had a knack for it. I enjoyed it. 0:02:06.680 --> 0:02:08.680 I always liked math, even though I was an English major. 0:02:08.720 --> 0:02:10.720 And you know, you can find other ways to put 0:02:10.720 --> 0:02:13.519 your writing and your reading acumen to work as well. 0:02:13.639 --> 0:02:16.080 And I'm going to say late nineteen nineties, nobody had 0:02:16.120 --> 0:02:18.600 any clue what was coming. A decade later. 0:02:18.400 --> 0:02:19.040 Not at all. Now. 0:02:19.200 --> 0:02:21.280 Lehman Brothers was a great place to start my career, 0:02:21.320 --> 0:02:23.200 but after two years I went to Morgan Stanley and 0:02:23.240 --> 0:02:25.160 that that's how I think of the beginning of my 0:02:25.200 --> 0:02:27.120 career because I spent ten years at Morgan Stanley. I 0:02:27.160 --> 0:02:29.000 was very invested in the firm and the firm was 0:02:29.360 --> 0:02:31.960 invested in me. I learned about, you know, the capital 0:02:32.000 --> 0:02:34.600 markets top to bottom, and I had a career there 0:02:34.639 --> 0:02:37.160 that took me from you know, from a starting associate 0:02:37.240 --> 0:02:40.000 role to running a business that became a CLO business, 0:02:40.040 --> 0:02:41.880 which now is like a real, you know, really important 0:02:41.880 --> 0:02:42.720 part of capital markets. 0:02:42.840 --> 0:02:44.600 What were your titles there? What'd you do there? 0:02:44.919 --> 0:02:45.519 Yeah? 0:02:45.600 --> 0:02:48.520 Well, I started as an associate with within fixed income. 0:02:48.680 --> 0:02:51.280 I you know, I was in sales, I was in trading, 0:02:51.320 --> 0:02:53.760 I was in structuring. I always worked within the credit 0:02:53.760 --> 0:02:57.320 derivative space, and then ultimately credit derivative started getting wrapped 0:02:57.360 --> 0:03:00.200 up in different ways and I worked on the COLO platform, 0:03:00.200 --> 0:03:03.320 and Morgan Stanley had a leading COLO platform that by 0:03:03.360 --> 0:03:06.360 the end of my time there, I ran. And that 0:03:06.520 --> 0:03:08.240 was about you know, I think about the role that 0:03:08.280 --> 0:03:10.040 clos play in the you know, in the in the 0:03:10.080 --> 0:03:13.680 markets today. It's an enormous origination function that helps you know, 0:03:13.800 --> 0:03:16.160 finance a lot of corporate America. 0:03:16.280 --> 0:03:18.480 John Mack was CEO at the time. Is that right? 0:03:18.880 --> 0:03:20.679 So I was there for Phil Purcell and I was 0:03:20.720 --> 0:03:21.480 there for John Mack. 0:03:21.800 --> 0:03:26.079 Wow, those are two legends in the industry. What inspired 0:03:26.120 --> 0:03:28.640 you to head over to Blackrock? 0:03:29.120 --> 0:03:31.000 I went to Blackrock with the guy that I was 0:03:31.040 --> 0:03:33.680 working for at Morgan Stanley, and we created a business 0:03:34.000 --> 0:03:36.560 that was essentially an advisory practice. This was two thousand 0:03:36.600 --> 0:03:38.480 and eight, and Blackrock was hired to work on a 0:03:38.480 --> 0:03:40.840 lot of these situations that were, you know, at the 0:03:40.840 --> 0:03:43.720 start of the crisis. So we worked with the Federal Reserve, 0:03:43.800 --> 0:03:45.360 we worked with the Treasury, a lot of the big 0:03:45.360 --> 0:03:49.640 financial institutions that had you know, problematic portfolios. And Blackrock 0:03:49.720 --> 0:03:52.080 was very well positioned as a byside firm, as a 0:03:52.120 --> 0:03:53.920 company that sort of hadn't underwritten a lot of like 0:03:53.960 --> 0:03:55.160 the problematic derivative. 0:03:55.920 --> 0:03:58.880 I mean they did. They even have an investing banking 0:03:58.960 --> 0:04:00.040 division back then. 0:04:00.080 --> 0:04:02.520 Know, I mean we called it advisory, but essentially it 0:04:02.560 --> 0:04:04.480 was like an investment banking function. I mean it was 0:04:04.520 --> 0:04:08.840 really consultative, providing advice, running portfolio analytics, thinking about you know, 0:04:08.880 --> 0:04:11.280 if you can separate like the liquidity crisis from the 0:04:11.320 --> 0:04:14.520 actual credit risk and and sort of the expected cash 0:04:14.520 --> 0:04:16.400 flows on these securities, what could you expect to get 0:04:16.440 --> 0:04:19.320 back And we, you know, we created a roadmap for 0:04:19.520 --> 0:04:22.240 the government on how to invest in these securities that 0:04:22.279 --> 0:04:24.640 they took away. You know that they essentially backstopped from 0:04:24.640 --> 0:04:27.440 these big organizations and tried to create a roadmap to 0:04:27.480 --> 0:04:29.559 bring them back to part to repay all the tax 0:04:29.560 --> 0:04:33.559 payers with interest. And in almost every respect over time, 0:04:34.240 --> 0:04:36.720 the government was successful in doing that, and Blackrock really 0:04:36.720 --> 0:04:40.160 played a very special role in creating those roadmaps. And 0:04:40.600 --> 0:04:42.039 you know, it wasn't what I would think of as 0:04:42.040 --> 0:04:44.280 like a highly profitable business, but in terms of like 0:04:44.320 --> 0:04:46.440 the are that was created around Blackrock as being like 0:04:46.480 --> 0:04:48.800 a solutions provider, you know, sort of a force for 0:04:48.839 --> 0:04:51.000 good in the world. That's what we did, and it 0:04:51.040 --> 0:04:52.600 was a it was a it was a great role 0:04:52.640 --> 0:04:52.919 for me. 0:04:53.320 --> 0:04:57.600 I recall that era that Blackrock essentially you had become 0:04:58.560 --> 0:05:02.400 the streets bond death. Like every brokerage firm used to 0:05:02.400 --> 0:05:05.479 have a fairly substantial bond desk, and it seemed like 0:05:05.760 --> 0:05:09.240 Blackrock has just sucked up all that paper and all 0:05:09.320 --> 0:05:10.000 those traders. 0:05:10.839 --> 0:05:13.880 Well, that sounds like an HR strategy, and I don't 0:05:13.920 --> 0:05:16.080 I don't know that I had any anything any part 0:05:16.080 --> 0:05:18.680 of that. But there was a lot of talent, for 0:05:18.800 --> 0:05:20.559 for sure, and there continues to be a lot of talent. 0:05:20.640 --> 0:05:20.800 You know. 0:05:20.880 --> 0:05:22.919 Some of those you know, some of the folks that 0:05:22.960 --> 0:05:26.120 worked on those, you know, and those assignments are essentially 0:05:26.160 --> 0:05:28.560 running Blackrock now. And it was you know, it was 0:05:28.600 --> 0:05:31.920 the consultative nature of thinking about you know, think about 0:05:31.920 --> 0:05:34.200 the challenges, how we can create solutions those challenges, think 0:05:34.240 --> 0:05:36.560 about the aspirations and the ambitions. And you know, that 0:05:36.600 --> 0:05:39.000 doesn't just apply to workout situations. That applies to all, 0:05:39.040 --> 0:05:41.160 you know, kind of all the clients. And it's something 0:05:41.160 --> 0:05:42.599 that I've tried to import, you know, in to my 0:05:42.640 --> 0:05:43.680 current role at Russell. 0:05:43.880 --> 0:05:46.680 So you're there for fifteen years, eventually you become head 0:05:46.680 --> 0:05:51.719 of their institutional business. That's that's a two trillion dollar silo, 0:05:52.600 --> 0:05:57.200 and you also helped establish Blackrock Retirement Solutions. Explain what 0:05:57.240 --> 0:05:57.920 these groups do. 0:05:58.240 --> 0:06:02.040 Yeah, So after after the consulting practice, I wanted to 0:06:02.080 --> 0:06:03.840 run the insurance business at black Rock that was a 0:06:03.839 --> 0:06:06.560 two hundred billion dollar business at the time. A little sleepy, 0:06:06.640 --> 0:06:07.800 not you know, what I would say is like a 0:06:07.839 --> 0:06:12.240 growth center, and it was housed with the business itself, 0:06:12.279 --> 0:06:16.000 was housed with true insurance experts, asset liability experts, people 0:06:16.040 --> 0:06:18.920 who really understood like the nuts and bolts of insurance companies. 0:06:18.960 --> 0:06:20.920 And I did not have an insurance background. 0:06:21.600 --> 0:06:23.400 And you know, for the first year, I had an 0:06:23.400 --> 0:06:25.359 insurance guy sort of stapled to me every time I 0:06:25.360 --> 0:06:26.640 went to a client and make sure I didn't get 0:06:26.640 --> 0:06:29.800 out over my skis. But you know, but you know this, 0:06:29.920 --> 0:06:32.640 being an outsider sometimes can actually really you know, help 0:06:32.680 --> 0:06:35.920 you think, think externally about some of the things that 0:06:36.000 --> 0:06:39.119 might be impacting the clients, the industry, of the sector, 0:06:39.279 --> 0:06:43.159 the business itself. And early on when I was in 0:06:43.200 --> 0:06:45.200 that role, we ran an analysis of the whole US 0:06:45.240 --> 0:06:47.279 and insurance industry, every company that was bigger than a 0:06:47.279 --> 0:06:49.640 billion dollars of general account assets, and we asked ourselves 0:06:49.760 --> 0:06:52.599 the question, what are some of the external factors that 0:06:52.640 --> 0:06:55.279 could impact these companies that they might not be expecting 0:06:55.360 --> 0:06:58.320 or prepared for, and where could black Rock play a 0:06:58.400 --> 0:06:59.680 role in helping. 0:06:59.440 --> 0:07:01.040 Them deal with those kinds of challenges. 0:07:01.080 --> 0:07:03.400 And we came up with seven situations Barry that we 0:07:03.400 --> 0:07:06.080 thought we're going to have like seismic type impacts on 0:07:06.160 --> 0:07:09.520 the companies, and four of them happened, and in three 0:07:09.560 --> 0:07:12.480 of those cases Blackrock went on to play a really 0:07:12.520 --> 0:07:14.320 big role and run the general accounts and that was 0:07:14.360 --> 0:07:16.080 more than one hundred billion dollars of assets, and we 0:07:16.080 --> 0:07:18.760 put on another hundred billion dollars along the way. So 0:07:19.000 --> 0:07:21.360 that was the case where the business started growing like 0:07:21.640 --> 0:07:23.920 very meaningfully, and I think Blackrock sort of paid a 0:07:23.960 --> 0:07:25.800 lot of attention to that and realized, you we could 0:07:25.800 --> 0:07:27.920 play a bigger role with these insurance companies. They're going 0:07:27.960 --> 0:07:30.080 to do a lot more interesting things than just invest 0:07:30.160 --> 0:07:32.800 in you know, sort of high quality fixed income. Over time, 0:07:32.880 --> 0:07:36.080 you also had some interesting stuff happening with Apollo and 0:07:36.120 --> 0:07:37.920 a theme they were kind of remaking the model a 0:07:37.960 --> 0:07:40.840 little bit. And Blackrock, you know, pays a lot of 0:07:40.880 --> 0:07:43.280 attention to what's going on in the in the outside world. 0:07:43.280 --> 0:07:45.600 And we grew the business. 0:07:45.600 --> 0:07:47.720 To say the very least, what are they twelve thirteen 0:07:47.760 --> 0:07:49.320 trillion dollars now in assets. 0:07:49.560 --> 0:07:52.120 It's a good business, to say the very least. 0:07:52.320 --> 0:07:55.320 So ten years of Morgan Stanley, fifteen years at Blackrock, 0:07:56.120 --> 0:07:59.720 what lessons did you take from those experiences to Russell investments. 0:07:59.800 --> 0:08:02.520 Yeah, Well, first and foremost, it's all about the client, 0:08:02.560 --> 0:08:05.080 and if you lose sight of that, understanding what the 0:08:05.080 --> 0:08:08.520 client is dealing with, their challenges, their ambitions, their aspirations. 0:08:08.600 --> 0:08:12.560 Being a consultative provider, if you start from a push 0:08:12.720 --> 0:08:14.800 out like here are the products that I have, Here 0:08:14.800 --> 0:08:17.360 are the things that I've done before, it almost never works. 0:08:17.400 --> 0:08:19.760 And it also that's not the age that we're living 0:08:19.840 --> 0:08:22.400 in today. The age that we're living in is how 0:08:22.400 --> 0:08:24.400 can I help you achieve the outcomes that you're trying 0:08:24.440 --> 0:08:26.520 to get to. How can I anticipate some of the 0:08:26.600 --> 0:08:29.200 challenges that you're going to experience, How can I help 0:08:29.240 --> 0:08:31.120 you learn from some of the things that I've seen 0:08:31.160 --> 0:08:33.920 in the sector or the industry. And you start from 0:08:33.920 --> 0:08:36.960 there and it builds a foundation with the client that 0:08:37.160 --> 0:08:39.920 is just sort of irreplaceable. So that's I mean, that 0:08:40.000 --> 0:08:43.120 was one really important learning. Now, I came into Russell 0:08:44.360 --> 0:08:46.440 because Russell had like, first of all, it's a ninety 0:08:46.480 --> 0:08:47.000 year legacy. 0:08:47.000 --> 0:08:47.960 Thank you for starting with. 0:08:47.880 --> 0:08:50.360 That nineteen thirty six. That's a lot you're coming up 0:08:50.360 --> 0:08:51.240 on a century soon. 0:08:51.360 --> 0:08:54.120 Yeah, exactly. I'm really proud to run. 0:08:54.200 --> 0:08:56.400 I'm the eighth CEO by the way of in ninety 0:08:56.480 --> 0:08:59.199 years of Russell investments. I mean that's so for US 0:08:59.200 --> 0:09:02.240 asset manager's and I think about the things that Russell 0:09:02.280 --> 0:09:03.960 has done in that time, Barry, I mean, it's been 0:09:04.000 --> 0:09:07.160 a real innovator and category creator. Everybody knows the Russell indexes, 0:09:07.640 --> 0:09:10.160 which were you know, sort of cultivated and innovated in 0:09:10.200 --> 0:09:12.040 all sorts of cool ways, and we all have it 0:09:12.080 --> 0:09:14.439 in our pensions in our four to one case. Uh, 0:09:14.480 --> 0:09:17.120 you know, Russell was the original pension investment consultant. We 0:09:17.200 --> 0:09:20.440 created that categoryus. Russell was the original o CIO and 0:09:20.480 --> 0:09:21.840 we're still a leader. 0:09:21.640 --> 0:09:22.560 In O CIO. 0:09:23.160 --> 0:09:25.440 These are these are really you know, sort of important 0:09:25.440 --> 0:09:30.040 categories that have a big impact on the investment ecosystem. 0:09:30.679 --> 0:09:32.960 And what was what was special to me about Russell 0:09:33.000 --> 0:09:35.920 and the reason I wanted to join is Russell's approach 0:09:36.000 --> 0:09:39.520 to doing all of these solutions is it's entirely open architecture. 0:09:40.000 --> 0:09:42.839 So the view is we build and implement portfolios at Russell, 0:09:42.840 --> 0:09:44.560 which is you know, something I worked on at Blackrock 0:09:44.600 --> 0:09:46.120 and to some extent and Morgan standly two. 0:09:46.600 --> 0:09:48.480 But the idea is we use best of. 0:09:48.480 --> 0:09:51.600 Breed managers and strategies from around the whole investment universe. 0:09:51.679 --> 0:09:54.160 So if I put together an O CIO portfolio at Russell, 0:09:54.600 --> 0:09:56.800 I'm building you know, fixed thing commandager, you know, the 0:09:56.800 --> 0:09:59.640 best quality fixed thing come managers, the best private assets managers, 0:09:59.679 --> 0:10:02.680 the best cash and so on, and best index products. 0:10:02.720 --> 0:10:04.040 You know, we can kind of it's it's we can 0:10:04.080 --> 0:10:07.120 kind of go everywhere within the ecosystem. And that was 0:10:07.160 --> 0:10:09.600 a model that I was very excited about because it 0:10:09.640 --> 0:10:12.040 became more about like thinking through the lens of what 0:10:12.080 --> 0:10:13.839 the client is looking to achieve and how can I 0:10:13.960 --> 0:10:16.320 use all of the tools and the ingredients available, as 0:10:16.320 --> 0:10:18.480 opposed to sort of a set, you know, set of 0:10:18.480 --> 0:10:20.720 tools that I that I had at hand from the 0:10:20.720 --> 0:10:21.679 company that I worked for. 0:10:22.360 --> 0:10:26.240 Really interesting. We're going to talk about pensions oci. We're 0:10:26.240 --> 0:10:29.520 going to talk about a little later. I didn't realize 0:10:29.559 --> 0:10:33.240 this till I started doing my homework. Russell is effectively 0:10:33.360 --> 0:10:37.920 credited with inventing smart beta. I mean, who knew that. 0:10:38.440 --> 0:10:40.880 I think of a couple of other firms as taking 0:10:40.880 --> 0:10:44.440 the leadership in that recently, but forty years ago, you 0:10:44.480 --> 0:10:47.240 guys were on the on the cutting edge of that. 0:10:47.880 --> 0:10:50.800 What is it like running a firm that has a 0:10:50.920 --> 0:10:54.800 near century long legacy. How does that affect how you 0:10:54.840 --> 0:10:57.560 think about risks and opportunities. 0:10:58.160 --> 0:11:00.960 Yeah, I mean the legacy is a wonderful thing, but 0:11:01.240 --> 0:11:02.599 you know, you can't rest like we all know, we 0:11:02.640 --> 0:11:05.880 can't rest on our laurels. It's you know, the job 0:11:05.920 --> 0:11:07.679 for me is to make sure that I'm taking sort 0:11:07.720 --> 0:11:10.360 of the best parts of the history and the legacy, 0:11:10.400 --> 0:11:12.720 the innovative spirit, all these cool things that we've done, 0:11:13.480 --> 0:11:16.560 and then evolving them for the world that we're in today. 0:11:16.760 --> 0:11:19.360 Our mainline business, we have we have sort of two 0:11:19.480 --> 0:11:22.400 central businesses. It's o Cio and its model portfolios that 0:11:22.400 --> 0:11:24.520 we do on the retail side, which is essentially the 0:11:24.720 --> 0:11:26.960 same kind of ideas of the institual business, building great 0:11:26.960 --> 0:11:30.320 portfolios and implementing them. Ninety percent of our business is 0:11:30.400 --> 0:11:32.560 those falls into those two categories. 0:11:32.960 --> 0:11:34.840 What I need to do today is make sure that 0:11:34.880 --> 0:11:35.679 I'm using. 0:11:35.640 --> 0:11:37.800 All of the tools available so as the market moves 0:11:37.800 --> 0:11:40.480 from you know, active products to passive products, as the 0:11:40.480 --> 0:11:44.000 market starts integrating private assets with public assets, all that 0:11:44.120 --> 0:11:47.400 is part of our portfolio today. And so the goal, 0:11:47.559 --> 0:11:48.960 you know, as the leader is to make sure that 0:11:49.000 --> 0:11:52.960 the strategy is incorporating We're open architecture it's truly incorporating 0:11:53.040 --> 0:11:55.199 the entire ecosystem into the into what we build for 0:11:55.240 --> 0:11:55.920 our clients. 0:11:56.040 --> 0:11:58.160 I want to get your feedback on a quote of 0:11:58.200 --> 0:12:02.920 yours I found in my in my homework quote financial 0:12:03.000 --> 0:12:06.920 security is a central challenge for this industry. How did 0:12:07.000 --> 0:12:12.160 your experiences at Blackrock, at Morgan Stanley, and way back 0:12:12.200 --> 0:12:15.760 when at Lehman Brothers, how did it affect your concept 0:12:15.800 --> 0:12:17.040 of financial security? 0:12:17.280 --> 0:12:20.720 Financial security and retirement security especially. Took me a little 0:12:20.720 --> 0:12:23.120 bit of time to hone in on Barry. I mean, 0:12:23.160 --> 0:12:26.160 I think back to my years at Morgan Stanley, and 0:12:26.240 --> 0:12:27.880 you know, the job there was very much about sort 0:12:27.880 --> 0:12:30.240 of like finding the arbitrage in the markets. It's where 0:12:30.280 --> 0:12:32.520 can we make money on as a sales and trading function, 0:12:32.559 --> 0:12:34.600 and we help clients along the way, you know, by 0:12:34.600 --> 0:12:36.680 delivering the products and the services that they want. But 0:12:36.720 --> 0:12:39.559 first and foremost it was about the investment bank. 0:12:40.240 --> 0:12:42.720 And that changed for me. 0:12:42.800 --> 0:12:45.760 I had a review with my boss at the time 0:12:46.400 --> 0:12:49.240 and she said to me something that she meant as 0:12:49.240 --> 0:12:52.120 a compliment. She said to me, Zach, you can really 0:12:52.160 --> 0:12:56.880 smell the money. And I went away and that was 0:12:56.880 --> 0:12:59.240 not the legacy that I wanted from my career, and 0:12:59.600 --> 0:13:03.080 you know, I moved to Blackrock shortly after that, where 0:13:03.080 --> 0:13:05.880 I was helping you know, the government, the tax payers 0:13:05.920 --> 0:13:09.400 deal with like really critical issues, like really big, thorny 0:13:09.440 --> 0:13:11.600 problems that we're going to have an impact on, you know, 0:13:11.679 --> 0:13:13.600 on the quality of life of the people in this 0:13:13.720 --> 0:13:18.040 in this country. And it was a complete reset of 0:13:18.120 --> 0:13:22.280 my perspective. You know, now we build portfolios at Russell, 0:13:22.440 --> 0:13:24.280 but you know, if I'm working for a pension or 0:13:24.360 --> 0:13:26.120 four one K or an insurance company, at the end 0:13:26.160 --> 0:13:29.040 of the day, I'm serving individuals. I'm helping them, and 0:13:29.080 --> 0:13:30.560 we don't lose sight of that. I'm helping them have 0:13:30.640 --> 0:13:32.080 a secure retirement. 0:13:32.160 --> 0:13:32.400 Now. 0:13:32.559 --> 0:13:34.000 By the way, they have to do their part too, 0:13:34.040 --> 0:13:37.120 because it's also about you know, saving early, contributing, making 0:13:37.120 --> 0:13:40.200 sure that you're you know, learning about the plan and 0:13:40.200 --> 0:13:43.200 making the right decisions. But the role that we play 0:13:43.240 --> 0:13:45.720 within the industry is a make or break in terms 0:13:45.720 --> 0:13:48.600 of whether they're able to whether they're able to achieve that. 0:13:49.600 --> 0:13:51.880 Now you also have something going on in the background 0:13:52.200 --> 0:13:54.719 that's that's going to have a very big impact in 0:13:54.760 --> 0:13:57.280 the next couple of decades with retirees in America, and 0:13:57.440 --> 0:14:00.520 that is that really the risk has shift. It now 0:14:01.040 --> 0:14:04.599 the retirement security risk has shifted from you know, organizations 0:14:04.679 --> 0:14:05.760 like the companies and the. 0:14:05.720 --> 0:14:09.599 Government companies in defined benefits to define content. 0:14:09.440 --> 0:14:10.320 Defined contribution. 0:14:10.520 --> 0:14:13.200 Right, so the standard model, the standard pension model, is 0:14:13.240 --> 0:14:15.960 shifting to the four to one k. And today still 0:14:15.960 --> 0:14:18.320 about half of retirees have access to a pension and 0:14:18.360 --> 0:14:21.320 that plus UH plus social security more or less gets 0:14:21.360 --> 0:14:23.920 the job done. But in another decade it's going to 0:14:23.920 --> 0:14:25.840 be less than a third, and in another two decades 0:14:25.840 --> 0:14:27.760 it's going to be very little at all. So that 0:14:27.920 --> 0:14:30.360 means that now the four to one K is the 0:14:30.360 --> 0:14:33.640 staple that's going to you know, result in a secure, 0:14:33.720 --> 0:14:38.560 comfortable retirement or or not. And you know, the big 0:14:38.640 --> 0:14:40.520 challenge with a four to one K is that the 0:14:40.640 --> 0:14:45.320 risk of saving, investing and also decumulation, taking that pot 0:14:45.360 --> 0:14:47.760 of money and knowing how long you know, the longevity risk, 0:14:47.800 --> 0:14:49.400 knowing how thinking about how long you're going to live 0:14:49.400 --> 0:14:51.800 and how to allott it over time. All that risk 0:14:51.840 --> 0:14:54.600 will now be borne by the individual. And we have 0:14:54.720 --> 0:14:57.760 not fully processed that. And the you know, within within 0:14:57.800 --> 0:15:00.360 the country that this is a crisis that's coming. People 0:15:00.360 --> 0:15:04.680 aren't prepared to own that responsibility and the system today 0:15:04.960 --> 0:15:06.840 isn't set up in such a way that sort of 0:15:06.880 --> 0:15:08.800 the decisions are very easy to you know, to make. 0:15:08.960 --> 0:15:11.160 The onus is really still on the individual. 0:15:11.320 --> 0:15:15.640 So that's really fascinating. How does that affect what you 0:15:15.720 --> 0:15:18.400 see within your role as CEO at Russell Investments. 0:15:18.480 --> 0:15:19.400 Yeah, well, thanks Berry. 0:15:19.400 --> 0:15:23.000 Our whole mission is built around helping people achieve financial security, 0:15:23.040 --> 0:15:25.480 and we do that on the institutional side by partnering 0:15:25.560 --> 0:15:28.680 with corporate sponsors and helping to ensure that the plans 0:15:28.680 --> 0:15:30.880 that they're putting in place and the role that they 0:15:30.880 --> 0:15:34.240 play through matching, through providing lifetime income, whatever the set 0:15:34.280 --> 0:15:37.160 of benefits are is going to be, is going to 0:15:37.160 --> 0:15:39.040 serve the participants in the way that we think is 0:15:39.040 --> 0:15:41.160 going to help them. Have you retire with confidence and 0:15:41.200 --> 0:15:44.840 with security. But as the you know, as the machine 0:15:44.840 --> 0:15:46.920 shifts and it moves more toward a four to one 0:15:47.000 --> 0:15:48.680 k and then you know, a lot of folks end 0:15:48.760 --> 0:15:50.640 up with a nest egg that they have to manage 0:15:50.680 --> 0:15:52.760 on their own. The goal is to make sure that 0:15:52.800 --> 0:15:54.560 on the wealth side we also have sort of the 0:15:54.640 --> 0:15:57.560 right kinds of products and services and solutions that help them, 0:15:57.640 --> 0:16:01.080 you know, understand income, help them understand accumulation, help them 0:16:01.120 --> 0:16:04.440 get the right diversification, help them get fair fees. I mean, 0:16:04.480 --> 0:16:06.920 the goal is to make sure that we're really delivering 0:16:06.920 --> 0:16:08.600 sort of a set of products and services that's going 0:16:08.640 --> 0:16:10.560 to allow them to live the kind of retirement that 0:16:10.600 --> 0:16:11.640 they all they'll hope for. 0:16:12.360 --> 0:16:16.040 Really really interesting. So whenever I talk to people about Russell, 0:16:16.080 --> 0:16:20.920 everybody knows the Russell two thousand. The question is what 0:16:20.960 --> 0:16:24.120 does Russell do? How do they make money on? They 0:16:24.200 --> 0:16:26.480 must do something more than the Russell two thousand. Tell 0:16:26.520 --> 0:16:29.840 us a little bit about the different business lines at 0:16:29.920 --> 0:16:30.880 Russell Investments. 0:16:30.920 --> 0:16:32.960 Sure, so the index business is now owned by a 0:16:33.000 --> 0:16:36.720 London Stock exchange and they do a magnificent job with it. 0:16:36.760 --> 0:16:38.320 And we still have a little bit of the you know, 0:16:38.360 --> 0:16:40.240 the aura. Every time I'm in the elevator, I see 0:16:40.240 --> 0:16:42.320 the advertisements for Russell and I think. 0:16:42.200 --> 0:16:45.240 I didn't have to pay for that ad. We get 0:16:45.240 --> 0:16:45.760 the benefit. 0:16:46.480 --> 0:16:50.000 The business is predominantly an it's an active asset management business, 0:16:50.080 --> 0:16:53.240 and we really have one main function barrier. It's about 0:16:53.240 --> 0:16:55.800 building and implementing great portfolios, and we do it for 0:16:56.000 --> 0:16:58.560 institutional clients and we do it for retail clients. So 0:16:59.160 --> 0:17:02.560 building the portfol folios is really about sort of portfolio construction. 0:17:02.640 --> 0:17:05.880 It's strategies and managers. For ninety years we've done manager 0:17:05.960 --> 0:17:09.240 research at Russell. We have, you know, a huge team 0:17:09.280 --> 0:17:12.080 of people now is augmented by AI and technology helping 0:17:12.200 --> 0:17:15.040 us look at sixteen thousand different managers and figuring out 0:17:15.040 --> 0:17:17.440 we invest with about two hundred and twenty five of them, 0:17:17.760 --> 0:17:20.640 you know, figuring out which managers and strategies we think 0:17:20.680 --> 0:17:24.040 makes sense in the different portfolios we create. And then 0:17:24.040 --> 0:17:26.520 the implementation is one of the coolest parts because that's 0:17:26.720 --> 0:17:29.320 we actually do the investing on behalf of the managers. 0:17:29.560 --> 0:17:32.560 They typically give us model portfolios, and then all the 0:17:32.600 --> 0:17:35.920 things around the portfolio that can be very incremental. It's 0:17:35.960 --> 0:17:42.400 the transitions, it's the hedging, completion, exercise completion mandates, overlays 0:17:43.040 --> 0:17:45.560 and you know, those things can be alpha generative, they 0:17:45.560 --> 0:17:48.120 can be very important for risk management. You can add 0:17:48.160 --> 0:17:52.600 a values overlay for clients and so it's a full 0:17:52.640 --> 0:17:54.680 portfolio delivery at the end of the day. 0:17:54.920 --> 0:17:58.760 Coming up, we continue our conversation with Zach Bufwold, Chairman 0:17:58.840 --> 0:18:04.280 and CEO of RUSS Investments, discussing exactly what Russell Investments 0:18:04.520 --> 0:18:08.399 does for its clients. I'm Barry Ridholts. You're listening to 0:18:08.520 --> 0:18:24.000 Masters in Business on Bloomberg Radio. I'm Barry Ridolts. You're 0:18:24.040 --> 0:18:27.720 listening to Masters in Business on Bloomberg Radio. My extra 0:18:27.800 --> 0:18:31.080 special guest this week is Zach Buckwald. He's chairman and 0:18:31.160 --> 0:18:34.920 chief executive officer of Russell Investments. The firm was founded 0:18:34.920 --> 0:18:37.800