Speaker 1: M This is Mesters in Business with very Renaults on
Speaker 1: Bluebird Radio. This week on the podcast, I have an
Speaker 1: extra special guest. Michelle Sites runs Russell Investments. She's chairman
Speaker 1: in chief executive Officer. Russell is a investing giant. They
Speaker 1: manage three thirty billion dollars or more. They do almost
Speaker 1: three trillion dollars a year in annual trades. They advise
Speaker 1: on another two point eight trillion dollars. UH. They're just
Speaker 1: a giant firm. About half of their business comes from overseas,
Speaker 1: from outside of the US. She is a highly regarded
Speaker 1: executive and a member of a small club of women
Speaker 1: who run giant asset management firms. We talk a little
Speaker 1: bit about that. We talk about how they've expanded out
Speaker 1: of beta and and indexing into a broader range of investing.
Speaker 1: Outsourced c I o IS is a large and fast
Speaker 1: growing business line of THEIRS, as well as alternative investments,
Speaker 1: and how they're expanding their platform to include that. UH.
Speaker 1: This is really a very much investing industry conversation if
Speaker 1: you're at all interested in what it's like to run
Speaker 1: a giant UH company that's in dozens and dozens of
Speaker 1: countries and have thousands and thousands of employees. You're gonna
Speaker 1: find this to be absolutely fascinating. So, with no further ado,
Speaker 1: my conversation with Michelle Sites of Russell Investments. This is
Speaker 1: mesters in Business with very Renaults on Bluebird Radio. My
Speaker 1: extra special guests this week is Michelle Sites. She is
Speaker 1: the chairman and chief executive officer of Russell Investments. The
Speaker 1: firm manages over three d thirty one billion dollars, with
Speaker 1: an additional two point eight trillion under advisement. They trade
Speaker 1: over two point six trillion dollars in equities a year.
Speaker 1: Half of their revenues comes from outside of the United States.
Speaker 1: Michelle Sites is a member of all the usual lists
Speaker 1: Most Powerful Women in Finance, the Power one hundred, Most
Speaker 1: Influential Women in US Finance. I'll stop right there, but
Speaker 1: we'll add Michelle Sites. Welcome to Bloomberg Berry. Thank you
Speaker 1: very much for having me. So let me jump to
Speaker 1: my first question. So you spent about twenty one years
Speaker 1: at William Blair. Tell us a little bit about how
Speaker 1: you got into the finance industry. Sure, sure, Um, well,
Speaker 1: going going back, Um, I decided early on that it
Speaker 1: was what I wanted to do, so before I applied
Speaker 1: to colleges, I decided that I wanted to go into business,
Speaker 1: and that was the cumulative impact of several things. Like
Speaker 1: many people in life, influenced by my parents. UM. First,
Speaker 1: my my father was very influential in my formative years,
Speaker 1: but especially as it revolved around business and dealing with people.
Speaker 1: He was a second generation entrepreneur, and from the age
Speaker 1: of twelve I worked by his side after school on
Speaker 1: the weekends during summer, and he really was quite impactful,
Speaker 1: and how I decided to pursue a degree in which
Speaker 1: college to go to UM. On the On the flip side,
Speaker 1: my my mother was very influential, and I would say
Speaker 1: more from the standpoint of the impact I wanted to
Speaker 1: have and and kind of I guess I would say
Speaker 1: control UM for financial stability. She worked very hard, but
Speaker 1: it was a long and difficult path for her. My
Speaker 1: parents divorced when I was young, and so I just
Speaker 1: I saw firsthand UM the need UH to leverage people's
Speaker 1: hard work and drive them toward financial security. And so
Speaker 1: I wanted to master money, I guess is the best
Speaker 1: the best way to phrase it. So I read all
Speaker 1: those money master books by I think it was John Train, buffet,
Speaker 1: shareholder letters, um et cetera. But I was just fascinated
Speaker 1: with the miracle of compound interest and the like. But
Speaker 1: but really what hooked me on investing was a high
Speaker 1: school field trip. Um So. I grew up in a
Speaker 1: small town in Indiana. We took a bus trip to Chicago.
Speaker 1: It was with my advanced chemistry class actually, and the
Speaker 1: main show was the Museum of Science and Industry, but
Speaker 1: we took a quick detour fortuitously for me, at the
Speaker 1: Chicago Board of Trade, and I was hooked. I love
Speaker 1: the passion, the energy from the floor and when I
Speaker 1: decided that investing was what I wanted to do, so
Speaker 1: um so that that set me on my trajectory early on,
Speaker 1: and before I even set off for college. So interestingly,
Speaker 1: post college, one of your first jobs in finance was
Speaker 1: in I've had a few guests who began their career
Speaker 1: the year the market took that horrific crash. Tell us
Speaker 1: about what that was like. Uh so early in your career.
Speaker 1: What do you remember from that? Yeah, well, it was
Speaker 1: you know, baptism by fire. So I had just graduated.
Speaker 1: Um I loaded up all my my worldly goods in
Speaker 1: a U haul and drove down to Charlotte, North Carolina
Speaker 1: to work with what was then MCNB, which turned into
Speaker 1: Nation's Bank and Bank America. Um but um, but it
Speaker 1: was a phenomenal culture. So I stepped foot into the
Speaker 1: investment industry in June of so a few months before
Speaker 1: the Baptism by Fire. Um. But but I would say
Speaker 1: the first leading up to that, I will just say
Speaker 1: what I remember the most about that year, as it
Speaker 1: was a tale of all kinds of uh cities. Um.
Speaker 1: The first was I thought I'd missed it, right. I mean,
Speaker 1: we had a tremendous bowl market from eight two to
Speaker 1: eighty seven. The del Jones had tripled, and I would
Speaker 1: sit there and talk with the veterans of the industry.
Speaker 1: All you know, I was younger by a factor of
Speaker 1: ten years anyone else managing money. Um. But I really
Speaker 1: did think that I missed it. That you know, this
Speaker 1: was the best we'd we'd ever had, and you wonder
Speaker 1: how much better it could get? And then you quickly
Speaker 1: found yourself or I found myself uh in Baptism by
Speaker 1: Fire Um with that faithful day which was Black Monday,
Speaker 1: October nineteenth, when the market fell in a single day
Speaker 1: and I'll age myself with this story, but what I
Speaker 1: what I remember most were the lines at the quotron.
Speaker 1: Do you remember quotron? So quotrons you had to you
Speaker 1: didn't have anything at your desk, and you didn't have
Speaker 1: twenty four or seven TV. So you did line up
Speaker 1: at a quotron UM, which were stationed in each of
Speaker 1: the major corners of the of the trading desk and
Speaker 1: the in the hallways, and you punch in your ticker symbols.
Speaker 1: And I remember I was dutifully punching in my ticker
Speaker 1: symbols because even with only three months under my belt,
Speaker 1: I was managing UM a few hundred million dollars UM
Speaker 1: and so I was very busy focused on not losing
Speaker 1: my client's money and how to lean in and make
Speaker 1: them money. And behind me stood the CEO of the
Speaker 1: bank UM. He was quite an imposing figure within financial services,
Speaker 1: but Hugh McCall, and he was asking me all kinds
Speaker 1: of questions, and I was, you know, being very serious
Speaker 1: and uh answering them all without turning around and looking
Speaker 1: at who was posing the question the questions to me.
Speaker 1: And I was, you know, I was twenty three years old,
Speaker 1: and UM he Finally, he finally said, who are you
Speaker 1: and what do you do? What do you do here? Started? Yeah,
Speaker 1: I started rattling off my resume and he said, he said,
Speaker 1: what qualifies you to manage money? Which was a which
Speaker 1: was a legitimate question, you know, three months three months
Speaker 1: out of school. Um. But but anyway, I guess, I
Speaker 1: guess that baptism by fire and uh and being being
Speaker 1: asked the question what does qualify you to do? This
Speaker 1: had had me take it incredibly seriously. UM. I number
Speaker 1: one understood that this is this is real money for
Speaker 1: real people who have real needs, and the emotions of people,
Speaker 1: UM can be the greatest destroyers of wealth. And as
Speaker 1: a professional investor, that's what you've got to learn to
Speaker 1: um harness or eliminate from the decision making process. UM.
Speaker 1: But it also made it the purpose of the industry
Speaker 1: quite real to me, very very fast. So when you're
Speaker 1: talking with people who really are fearful of being able
Speaker 1: to retire, being able to send kids to college, the
Speaker 1: markets are in a free fall. It was it was
Speaker 1: a very good baptism by fire. UM. So I'm glad
Speaker 1: I saw what I thought was the peak. I'm glad
Speaker 1: I was was so early in my career trajectory that
Speaker 1: I under stood that this wasn't a game, UM, and
Speaker 1: I'm glad that I was that close to the clients
Speaker 1: rather than being disintermediated, you know with a mutual fund
Speaker 1: where you never talked with the end clients UM as much,
Speaker 1: and so it just made it. It made it very serious.
Speaker 1: It made it very real, very quickly, and you received
Speaker 1: the firm's Rookie of the Year award. Tell us about that,
Speaker 1: Oh well, UM, well that was fun. It was. It was.
Speaker 1: There was a big celebration on the top floor of
Speaker 1: the building. Hugh came, UM, all of the executive team
Speaker 1: came to celebrate the top investment performers in the investment
Speaker 1: division and so UM I was invited to that. It
Speaker 1: was my first it was my first year UM, and
Speaker 1: I would say that, you know, I didn't I understand
Speaker 1: the import of it, to be honest, until several very
Speaker 1: senior portfolio managers came up and said, you do understand
Speaker 1: how important it is to be seen here, right, And
Speaker 1: I said, of course, but I really I really didn't.
Speaker 1: But it was most important, I would say, for my
Speaker 1: street cred to be part of that UM, to be
Speaker 1: part of that group and to give me credibility, especially
Speaker 1: given you know my um, disproportionate youth, uh and frankly inexperience.
Speaker 1: I mean I did do well. One year does not
Speaker 1: prove skill, to be quite frank but um, thirty five years.
Speaker 1: Hence I think I learned a lot from that time period. Um.
Speaker 1: And I was a student too of of the I
Speaker 1: would say, of the profession, and so that was very
Speaker 1: very helpful to me. And understanding how important it was
Speaker 1: to deliver on the value proposition to the clients and
Speaker 1: have it celebrated in the way that they did was
Speaker 1: was really important, but it was it was a great way. Frankly,
Speaker 1: the crash and being Rookie of the Year was a
Speaker 1: was a great way to start my career. So the
Speaker 1: first I don't know if I should call it half,
Speaker 1: but certainly the first part of your career. You're on
Speaker 1: the asset management side. You eventually rise to the leadership
Speaker 1: of William Blair and now you serve as CEO of
Speaker 1: Russell Investments. How did managing assets and being part of
Speaker 1: a larger corporate entity helped prepare you for your present
Speaker 1: leadership role. That's a really good question, especially the way
Speaker 1: you phrase it, um, you know, not not many people
Speaker 1: ask me about the similar charities or the leverage from
Speaker 1: being an investor to being a leader. UM. So so
Speaker 1: that's a poignant question because I think I think there
Speaker 1: are strong similarities. UM. You know. First of all, I
Speaker 1: would say that just what energizes me aligns to the role,
Speaker 1: both the investing role as well as the leadership role.
Speaker 1: And so I would say that solving solving problems energizes me.
Speaker 1: Trying to figure out what the root cause UH problems
Speaker 1: are and making sure that there's a there's a level
Speaker 1: of human connection that makes the work meaningful. UM. It
Speaker 1: inspires me. And so I think that just as a touchstone, UM,
Speaker 1: that's that's been critically important both to being able to
Speaker 1: be a lifelong learner as an investor, um, but also
Speaker 1: as a as a leader in a people and knowledge
Speaker 1: worker industry. UM. The second, the second thing I would
Speaker 1: say is that as a as a PM as an investor,
Speaker 1: where I was most additive two my peer discussions. I
Speaker 1: do believe investing as a team sport and UM, you
Speaker 1: make each other better by coming at problem solving and
Speaker 1: the puzzle of investing with different perspectives and and mine
Speaker 1: was um that I was a very structured and strategic thinker.
Speaker 1: UM I could do the analyst role and the modeling role,
Speaker 1: but it didn't excite me as much as digging into
Speaker 1: the problem that a company was solving for and how
Speaker 1: was it creating a durab both sustainable franchise that was
Speaker 1: frankly in some large way additive to society and filling
Speaker 1: a societal need. And so that that was really what
Speaker 1: I enjoyed, and it aligns very much with being a
Speaker 1: CEO as well, and so I think I think that
Speaker 1: part was very important. I think also just being data
Speaker 1: driven in your decision making, but being very understanding of
Speaker 1: how important people and teams are, whether they be management
Speaker 1: teams for the companies that you're investing in UM or
Speaker 1: the culture of an organization, or the ability to execute
Speaker 1: on a strategic plan, all has to be with a
Speaker 1: very strong people component and the desire and and understanding
Speaker 1: of the import of human connection. And I think that
Speaker 1: as an investor as well as a leader, I've hopefully
Speaker 1: been able to marry those two in a very in
Speaker 1: a very real way. Let's talk a little bit about Russell,
Speaker 1: which I used to associate with indexes the Russell two thousand,
Speaker 1: most famously, but that's no longer the focus of your business.
Speaker 1: That that particular line was sold a couple of years ago.
Speaker 1: Tell us a little bit about your current state of
Speaker 1: your business, who your clients, and what is your key focus? Sure, um, well,
Speaker 1: I would say that the as an investor, the most
Speaker 1: insightful questions you could ever ask a management team is
Speaker 1: is tell me about how the firm started and how
Speaker 1: you got to where you are. So I won't do
Speaker 1: a whole a whole history of Russell, but the fact
Speaker 1: that you bring up the indicase is a pretty critical
Speaker 1: part of who Russell is today and and where the
Speaker 1: um competitive advantage comes from. So so let me start there.
Speaker 1: You know, we're eighty five years young, um, and Frank
Speaker 1: Russell opened the doors of our firm. Uh. And he
Speaker 1: did so, um under the umbrella of investing, you know,
Speaker 1: for people's financial security. So he started with individuals. But
Speaker 1: his grandson, George Russell, really was a pioneering spirit. That's
Speaker 1: true generally now that I lived there of the Pacific northwest. Um.
Speaker 1: But but where we where we developed, uh, the indices
Speaker 1: along the way was really at the core of what
Speaker 1: makes the firm tick, and that's putting client problems at
Speaker 1: the center of innovation. And so we we did start
Speaker 1: with pension consulting, so we we were a pioneer in
Speaker 1: developing the pension consulting world. Uh, then we moved on
Speaker 1: to also creating indices and manager selection was it at
Speaker 1: the core of our consulting practice. And but we didn't
Speaker 1: have good indicase to measure the ability and the skill
Speaker 1: and remove factors from the influencing UM the alpha derived
Speaker 1: from the individual managers. So that's where the Russell indicase
Speaker 1: came from. And factor investing is still core to what
Speaker 1: we offer and do. We do it in the form
Speaker 1: of direct indexing and overlays and the like. But but
Speaker 1: that was really an important academic process but also just
Speaker 1: core to the firm being UM kind of a client
Speaker 1: centric innovative core. UM. The other parts of what we
Speaker 1: do manager selection, advice, UM, portfolio construction, assembly, risk management,
Speaker 1: implementation and execution are all now UM a part of
Speaker 1: what we do. But really how I define the firm
Speaker 1: today is an investment solutions firm. That's the only thing
Speaker 1: we do is provide investment solutions with end to end capabilities,
Speaker 1: so that we are either an extension of an investment staff,
Speaker 1: whether it's a corporate dB plan, a DC plan, sovereign
Speaker 1: wealth fund, or if you're an advisor in the wealth space,
Speaker 1: we're either an extension of your investment staff and capabilities,
Speaker 1: or we're a full outsource of your staff, which is
Speaker 1: commonly referred to as the O c i O industry
Speaker 1: or fiduciary management. So that's really interesting. The I think
Speaker 1: the average non financial professional understands UM consulting. You you
Speaker 1: want to know more about how to do something, you
Speaker 1: hire somebody with an expertise and they come in and
Speaker 1: will work with your staff to set up your four
Speaker 1: oh one K plan for the company or things like that.
Speaker 1: Tell us more about the O c i O role.
Speaker 1: How fast is that area growing? Who are those sorts
Speaker 1: of clients? It sounds like a very robust business line
Speaker 1: that the average person is probably less familiar with. Yeah, well, um,
Speaker 1: so uh the answer is yes, you you are right
Speaker 1: that people are less familiar with it. I do believe that, um,
Speaker 1: the industry is headed here quickly. So it may it
Speaker 1: may take on different terms, but allowing allowing us the
Speaker 1: industry to effectively personalize at scale in a very institutionally
Speaker 1: sophisticated manner is what I believe is the future of
Speaker 1: the industry UM and so and so people refer to
Speaker 1: it as a product. I don't think of it as
Speaker 1: a product. I think it's the core of the of
Speaker 1: the purpose of the industry and solving for client needs
Speaker 1: and so. Let me so, I'll back up a little
Speaker 1: bit and say, yes, it is one of the fastest
Speaker 1: growing segments in the asset management industry. It's called solutions outcomes,
Speaker 1: goal oriented investing. But when you choose to truly outsource
Speaker 1: the activities if it's not core to what you do,
Speaker 1: if you are you know, Boeing as a client, Uh,
Speaker 1: they are not in the business of investing, but they
Speaker 1: do have very large UM pension plans BENEF that plans
Speaker 1: for to secure their employees retirements UM and that increasingly
Speaker 1: has been an area that we've been helping, not just
Speaker 1: smaller midsize companies. It used to be that it's more
Speaker 1: the sub ten billion dollars in assets UM plans that
Speaker 1: would outsource this activity UM. But even there UM seventy
Speaker 1: I think it's over seventy of asset owners with assets
Speaker 1: up to ten billion have not yet outsourced UM. There's
Speaker 1: also an incredibly large trend which we're benefiting from. Uh
Speaker 1: we just one and will make public a mandate that's
Speaker 1: over ten billion US in the UK that has decided
Speaker 1: that they would outsource their pension scheme to Russell Investments
Speaker 1: UM and then BCG also you know tags. This is
Speaker 1: one of the fastest growing UM categories within the industry,
Speaker 1: even faster frankly than private markets, which is kind of
Speaker 1: astounding given how much private markets UM gets played in
Speaker 1: the press relative to O C I, O and and
Speaker 1: and fiduciary management. Really really quite interesting. So you mentioned
Speaker 1: factor investing earlier UM and again I think of Russell
Speaker 1: is most associated with small cap as a as a factor.
Speaker 1: Is the cheap beta story over now or is there
Speaker 1: still some juice left to be squeezed from uh smart
Speaker 1: beta factor investing, whatever we want to call it. Well,
Speaker 1: I do believe that as the industry has evolved UM,
Speaker 1: you know, factor investing has been UM very important in
Speaker 1: terms of delivering value in the form of exposures two factors,
Speaker 1: whether it be through you know e t s or
Speaker 1: passive mutual funds or direct investing. And I don't believe
Speaker 1: that's going away. UM, It's been a core of how
Speaker 1: we build portfolios for big institutions as well as for individuals.
Speaker 1: Of our business is in the wealth channel where we
Speaker 1: have advisors as our clients. So we're the number one
Speaker 1: third party third party models provider in that channel. And
Speaker 1: so I do believe that this will still be a
Speaker 1: sustainable and consistent part of how of how individuals and
Speaker 1: UM in business his build portfolio. So so Number one
Speaker 1: is it's not over. I think it's now just become
Speaker 1: a core part of portfolio construction. But I do believe
Speaker 1: I often get asked the passive versus active and the
Speaker 1: demise of the active asset management industry, and I believe
Speaker 1: that this is a continuum. The The real story is
Speaker 1: a client outcome story. The real story is the need
Speaker 1: to solve for financial resilience, financial stability. UM. The real
Speaker 1: need is about putting the clients at the center of
Speaker 1: our of our innovation to ensure that we are delivering
Speaker 1: on the goals that are quite individually driven. And so
Speaker 1: that that's what I believe the real story is rather
Speaker 1: than a cheap data story. But I don't believe that
Speaker 1: factor exposure however it is you get it within a
Speaker 1: portfolio is over by any stretch. I think that the
Speaker 1: conversation will turn more quickly with the use of technology
Speaker 1: and better hyping, which which we can talk about. But
Speaker 1: but I do believe that technology and streamlining the delivery
Speaker 1: and access points and fractionalization of shares word will drive
Speaker 1: access to factor exposures to become more scalable, uh for
Speaker 1: smaller accounts, and I believe that's a very exciting development
Speaker 1: which will deliver more value and more importantly allow us
Speaker 1: to personalize at scale using both factor exposures, which is
Speaker 1: what I refer to as data but allows you to
Speaker 1: really fine tune a portfolio for factor expos posures, but
Speaker 1: also customize for individual outcomes, whether it be income or
Speaker 1: total return or e S g UM or values based investing,
Speaker 1: things like that. And in that vein active investing is
Speaker 1: still very much alive. Yeah, I think there's a misunderstanding
Speaker 1: because half of e t fs and mutual funds are
Speaker 1: now indexed. But when you look at the broader asset
Speaker 1: management universe, the vast majority of management is still pretty active,
Speaker 1: isn't it. Well, it is pretty active, and frankly with
Speaker 1: the growth of private markets generally speaking, UM, both both
Speaker 1: credit and equity growing very quickly, right, and so you've
Speaker 1: got this this ground swell of entrepreneurial activity and private
Speaker 1: mark it's investing more generally, which I'm sure we'll talk about,
Speaker 1: but but that that growing sleeve UM has been very
Speaker 1: impactful and democratizing access to that but doing so responsibly
Speaker 1: will be another imperative for the for the industry. And
Speaker 1: and being able to drive engagement UM around d s
Speaker 1: G and also make it more customer customized around personal
Speaker 1: personal values UH necessitates UM active management. And so I
Speaker 1: believe it's it's always been an end for me, not
Speaker 1: an either or, and it's always been a component of
Speaker 1: the story about delivering client value, which is lowering cost
Speaker 1: and allowing more control of how to build portfolio construction
Speaker 1: alpha and allow for better execution ALPHA. And so I
Speaker 1: really do believe that portfolio construction assembly, tapping into all
Speaker 1: asset classes and leveraging technology for personalization at scale is
Speaker 1: the story UM of the asset management industry. But it
Speaker 1: doesn't make the factor exposure story go away. It just
Speaker 1: makes it an an instrumental part of the equation. Huh.
Speaker 1: Really quite interesting. We'll talk about E s G in
Speaker 1: a bit. I'm curious if you have any thoughts on
Speaker 1: direct indexing. We've seen Morgan Stanley and Van Gord and
Speaker 1: black Rock make acquisitions to enter that space. What are
Speaker 1: your thoughts on the concept of using software to kind
Speaker 1: of modify passive indices. Absolutely, we are all in so
Speaker 1: we do direct indexing very actively and have for quite
Speaker 1: a long time. We do it for the largest asset
Speaker 1: pools in the world. But we've also been able with
Speaker 1: the use of technology, much like UH the acquisition acquisitions
Speaker 1: that others have made in the industry, We've we've honed
Speaker 1: our capabilities to do that over time. Again, it came
Speaker 1: from the core of UH index investing in general for
Speaker 1: us UM, but that factor exposure investing, has now been
Speaker 1: driven down into the tens of millions of dollars that
Speaker 1: we can do direct investing for. I believe that's also
Speaker 1: true of of these other firms you you talk about
Speaker 1: and what they're entities or their act acquisitions have been
Speaker 1: able to do. And we're all racing very quickly UM
Speaker 1: again to be able to use technology as well. Is
Speaker 1: the pipes within the industry to gather data in real
Speaker 1: time from our clients, incorporate the data UM and then
Speaker 1: UM and then make it less of a two UM
Speaker 1: dimensional risk return efficient frontier conversation and very quickly make
Speaker 1: it three dimensional. And the reason I mentioned that is
Speaker 1: it goes back again to what I was saying about
Speaker 1: personalization at scale, fractionalized shares, direct investing, technology, UH, data UM,
Speaker 1: data gathering is all coalescing to a very very exciting
Speaker 1: and I would say value enhancing UH contribution back to society.
Speaker 1: And that's and that's allowing us to really do you know,
Speaker 1: tax efficiency down to the individual level. UH. Direct investment,
Speaker 1: direct indexing allow you to do that UM, but direct
Speaker 1: investing overall allows you to do that UM, allowing for
Speaker 1: personalization to your values and understanding how that changes your
Speaker 1: risk return profile and how to get you back on it.
Speaker 1: So I actually believe that vehicles as we know them
Speaker 1: today UM could change pretty dramatically as we head into
Speaker 1: the future UM, and that's a good thing. We shouldn't
Speaker 1: be trying to protect protect vehicles. We should be trying
Speaker 1: to distribute what it is we all do and can
Speaker 1: give access to, so that again, UM, you can achieve
Speaker 1: personalization at scale and really drive to individual outcomes. And
Speaker 1: by definition, you know, a target date fund says that
Speaker 1: all you know, fifty five year olds are exactly the same, right,
Speaker 1: And we all know it's a vast improvement over over
Speaker 1: defaulting to cash to have plans to fault to target
Speaker 1: date funds. But we have a long way to go,
Speaker 1: uh to to make it to the point that frankly,
Speaker 1: many UH consumer oriented companies have gotten to already with
Speaker 1: being able to customize the experience that you have as
Speaker 1: well as outcome. And I think that direct indexing, direct indexing,
Speaker 1: but also just direct investing is core to that. Do
Speaker 1: you want to explain the difference between the two direct
Speaker 1: indexing pretty straightforward? Instead of buying the S and P
Speaker 1: five hundred spiders, you buy all five hundred of those companies,
Speaker 1: and you can say, hey, I don't want to own
Speaker 1: gun manufacturers or royal companies, or companies that have no
Speaker 1: women on their boards. You can tune it in just
Speaker 1: about any way imaginable. How does that contrast with direct
Speaker 1: investing versus direct indexing? Uh? Well, well, indexing is indexing, right,
Speaker 1: I mean, so you're trying to get your trying to
Speaker 1: when you index your indexing to something UM and typically UH,
Speaker 1: that's that's a risk return, that's a risk return profile
Speaker 1: and UM and a factor exposure. What what I'm talking
Speaker 1: about is doing another layer, which means you're optimizing for
Speaker 1: a third um, a third dimension which could be optimizing
Speaker 1: for taxes, optimizing for environment or social or government or
Speaker 1: governance issues. But you do have to decide what it
Speaker 1: is you're optimizing for, and you can either do it
Speaker 1: through pure indexing and factor exposure or you can lean
Speaker 1: into act of which frankly, I don't believe that E
Speaker 1: s G investing is fully captured or utilized in a positive, proactive,
Speaker 1: forward leaning way so that you're measuring impact rather than
Speaker 1: measuring risk exposure. So we can talk about that, but
Speaker 1: but you you really do that best with active engagement
Speaker 1: and fundamental judgment rather than backward looking data, which is
Speaker 1: which is ultimately where indices don't do the forward looking
Speaker 1: impact role as well. So so direct indexing would be
Speaker 1: mimicking factor returns. Direct investing, in my mind, opens up
Speaker 1: the aperture for everything, both factor exposures as well as
Speaker 1: leaning into active and personalization at scale. So I want
Speaker 1: to talk about the transformation you've helped to affect it Russell.
Speaker 1: But I have to start with your time at William
Speaker 1: Blair from whence you were recruited to Russell. What was
Speaker 1: that process like, how did you come to realize Hey, uh,
Speaker 1: I've enjoyed my time at Blair, but Russell looks kind
Speaker 1: of interesting. Well, UM, I would say that when I
Speaker 1: was approached about a role at Russell UM, it happened
Speaker 1: organically and slowly. I had known uh Tier Associates, which
Speaker 1: is one of the private equity firms that UM invests
Speaker 1: UH and and sponsors Russell UM for quite a long
Speaker 1: time UM. And then, like many things in life, it uh,
Speaker 1: it happened slowly and then all at once, And it
Speaker 1: was ultimately one of the hardest decisions that I've ever made.
Speaker 1: And I would say first because I enjoyed my time
Speaker 1: at William Blair immensely. After twenty plus years, it becomes
Speaker 1: part of the fabric of who you are. And we
Speaker 1: we grew together UM as a as a team. We
Speaker 1: had a fivefold increase from two thousand and one when
Speaker 1: I took over and drove it with our team, a
Speaker 1: phenomenal team who were close personal friends. Today. UM, you know,
Speaker 1: to over seventy five billion when I left a fivefold
Speaker 1: increase and and took a start up institutional business that
Speaker 1: was only a few couple of billion dollars to eight
Speaker 1: fold increase. So it was a it was a tremendous,
Speaker 1: tremendous ride. UM. But I would say the difficulty and
Speaker 1: the reason it was the hardest decision for me to
Speaker 1: make is I have five children, UM. Four of them
Speaker 1: were in high school and one was in UM was
Speaker 1: in elementary school when this opportunity came around. And you know,
Speaker 1: uprooting your family after you've been in a in a
Speaker 1: community for twenty six years, UH is no small decision.
Speaker 1: My husband was incredibly supportive. H he views life as
Speaker 1: an adventure, and he's very supportive of of me uh
Speaker 1: in my career, and he knows how much energy I
Speaker 1: get from it. But but you know, uprooting everyone, plus
Speaker 1: my mother and extended family was was no small was
Speaker 1: no small feat. But we took the caravan to Seattle,
Speaker 1: and I was ready for the for a new challenge,
Speaker 1: and it was incredibly exciting, But it was a it
Speaker 1: was a very difficult decision to make. It's been a
Speaker 1: great decision in retrospect, but but I always remind myself
Speaker 1: to be comfortable with being uncomfortable, and I would say
Speaker 1: that was one of those times for sure. Yeah, good,
Speaker 1: good advice. So William Blair was more of an investment bank,
Speaker 1: Russell is more of a pure asset manager. What did
Speaker 1: you learn at William Blair that translated well to Russell UM? Well, well,
Speaker 1: two things. The first. The first is that the best
Speaker 1: kept secret I guess that's still a best kept secret
Speaker 1: is that Blair UM the asset management business did grow
Speaker 1: to be the largest UM business at William Blair UM,
Speaker 1: and so UM as much as we were well known
Speaker 1: for our investment banking activities, UM it grew to be
Speaker 1: a powerhouse and and still is UH in the asset
Speaker 1: management side UM. But but you are right that UM.
Speaker 1: While William Blair was a multi line firm, Russell is
Speaker 1: hyper focused and only focused on one business, and that's
Speaker 1: investment solutions. We do everything that's required to manage UM portfolios,
Speaker 1: but it's only one business. And I did love the
Speaker 1: beauty of that. I loved the focus, UH, the attention
Speaker 1: of UH the entire organization on one deliverable UH two
Speaker 1: different clients around the world. So the last mile is
Speaker 1: always localized and personalized. But but that that that level
Speaker 1: of focus was is a luxury. Not many firms have it,
Speaker 1: and so I very much appreciated that. But you also,
Speaker 1: what what did I learn from Blair that I carried
Speaker 1: to Russell? And I think there are many similarities that
Speaker 1: The first is that I had known Russell for a
Speaker 1: very long time. Culturally I understood stood the culture quite well.
Speaker 1: The value structure which was very similar to William Blair UM,
Speaker 1: and it was client centric UH fiduciary UM at its core.
Speaker 1: So while William Blair was in the security selection business
Speaker 1: and Russell is in the portfolio construction, portfolio assembly, risk
Speaker 1: management business slightly different, UM, you still had at your
Speaker 1: core a value structure of non negotiable integrity UH client
Speaker 1: centric alignment. Frankly, both at Blair as well at Russell,
Speaker 1: so much so that growing UM growing. I had to
Speaker 1: convince my partners at Blair early on and also convinced
Speaker 1: Russell that growing is good. You know, growing, growing the
Speaker 1: business is good for clients. You can't impact clients if
Speaker 1: you aren't getting more of them UM, and so growing
Speaker 1: is good. But the client centric focus was so strong
Speaker 1: that there was a bit of a resistance and and
Speaker 1: not as much alignment to grow because we would make
Speaker 1: more money. Um. That didn't motivate either firm. It was
Speaker 1: more uh curating um, the outcome for the client and
Speaker 1: ensuring that you were protecting performance and serving those clients well.
Speaker 1: And sometimes, especially in a profession like the investment industry,
Speaker 1: delivering a service at scale versus selling a product. UM.
Speaker 1: You know, size can be the enemy of the best outcome,
Speaker 1: and so making sure that we do that uh and
Speaker 1: manage the business in a way that growth actually a
Speaker 1: nurse to the benefit of the clients has been a
Speaker 1: key a key focus during the time that we grew
Speaker 1: the business at Blair, and it's also been a key
Speaker 1: focus uh and the core touchstone as we've transformed the
Speaker 1: business at Russell. Huh. So let's talk a little bit
Speaker 1: about that transformation. You've described having to work hard to
Speaker 1: change the firm's corporate culture. Tell us about what it
Speaker 1: was like to do that and why corporate culture is
Speaker 1: so important. Well, UM, the bottom line is that why
Speaker 1: it's so important is that people matter. You can't in
Speaker 1: a people driven business, you can't instatutionalize anything to the
Speaker 1: point that people don't matter, and so UM, Ultimately, any
Speaker 1: great firm is a collection of individuals that work as
Speaker 1: a high functioning team for a purpose. So I do
Speaker 1: believe that culture is a competitive advantage. There's no one
Speaker 1: recipe for success. But starting with a very clear value
Speaker 1: structure that's aligned to the client and the health of
Speaker 1: the individuals, I think is you've won nine tenths of
Speaker 1: the battle. So I will just start by saying that
Speaker 1: Russell had that, UM, it's a venerable, iconic firm in
Speaker 1: our industry. UM, I'm very proud to be affiliated with it.
Speaker 1: And what what I what I did less than change it. Hopefully,
Speaker 1: hopefully I've just enhanced it and understood what what we
Speaker 1: absolutely And actually it was a question I asked when
Speaker 1: I did my tour around the world for four months
Speaker 1: and logged five hundred plus thousand miles on a plane
Speaker 1: is just the listening tour is what what do do
Speaker 1: I absolutely need to be careful not to break? And
Speaker 1: what do I need to change? And so it was
Speaker 1: a question that I asked clients. It was a question
Speaker 1: that I asked all of the associates around the world.
Speaker 1: We did surveys, I got feedback in any forum that
Speaker 1: I could. When I first introduced myself to the firm,
Speaker 1: I put the values and the purpose of the firm
Speaker 1: up on the screen and talked about those UM so
Speaker 1: I leaned in to the strengths of the firm. But
Speaker 1: what I what I what I agreed with all of
Speaker 1: my associates was that we need did too align the
Speaker 1: firms activities around values that things that the clients valued
Speaker 1: more than just liked. So we were such a client
Speaker 1: centric firm that we personalized for every single client. And
Speaker 1: you can appreciate that that UM ultimately undermines quality and
Speaker 1: delivery of service because you can't customize everything and you
Speaker 1: definitely can't grow a durable, profitable franchise by UM by
Speaker 1: individualizing every single thing without it being scalable. And so
Speaker 1: what what I changed as part of the culture was
Speaker 1: making sure that everyone understood that even though we were
Speaker 1: academically and intellectually very rigorous in how we solve problems
Speaker 1: for clients, it wasn't enough to be right with with
Speaker 1: just an individual client. We had to be equally effective
Speaker 1: and how we delivered that at scale and leverage the
Speaker 1: i P of the global capabilities for the benefit of
Speaker 1: all clients and then customized UM at the last mile.
Speaker 1: And that was that commercial instinct that UM that why
Speaker 1: of why growth was good? Why do we need to
Speaker 1: change our behaviors so that we can get scalable, durable,
Speaker 1: sustainable growth for the clients as well as high quality,
Speaker 1: frictionalist service for them was what needed to change. And
Speaker 1: so that's not a small undertaking. But culturally it was
Speaker 1: being less independent in the delivery of of client service
Speaker 1: and UM manufacturing capabilities and more about leveraging one Russell
Speaker 1: and getting global scale as an organization. And and that
Speaker 1: was a cultural change, but one that everyone understood and
Speaker 1: brought into So let's talk about something that didn't change.
Speaker 1: And you reference this earlier. The firm's core purposes to
Speaker 1: quote improve people's financial security unquote. Tell us a bit
Speaker 1: about that purpose. Well, I think that every every company
Speaker 1: benefits from asking the question why do you exist with?
Speaker 1: What problem are you trying to solve? For? You know,
Speaker 1: how big of a problem is it? And are you
Speaker 1: making it easy for clients to execute upon it? And
Speaker 1: so those are just pretty core questions I believe, for
Speaker 1: for any business and for for our history. But fortunately
Speaker 1: for our company, we we had a founding family that
Speaker 1: understood that years ago, and so I didn't have to
Speaker 1: change a thing. And it actually was part of kind
Speaker 1: of my my mantra as an industry leader, even when
Speaker 1: I was at Blair, that we needed to get back
Speaker 1: to the roots of what our industry was built for
Speaker 1: and why it existed. And and that's too, you know,
Speaker 1: efficiently invest um people's savings for ultimately their financial security,
Speaker 1: which we're not doing a great job at as an industry. Uh.
Speaker 1: And it's also for the effective deployment of capital. And
Speaker 1: so that why is really important. I can't tell you
Speaker 1: how many times I talk about it, how I bring
Speaker 1: it to life with the individuals, the companies, and ultimately
Speaker 1: the individuals that rely on those company benefit plans for
Speaker 1: their own financial security and their future. I talk about
Speaker 1: it all the time, and it does make its way
Speaker 1: into everything that we do. It makes its way into
Speaker 1: how we think about creating products and how we service
Speaker 1: um our clients. UM We don't talk about um we
Speaker 1: don't talk about selling products or beating benchmarks. We talk
Speaker 1: about servicing um our clients and creating strategies for outcomes.
Speaker 1: And I think all of that goes back to being
Speaker 1: very grounded and why why we exist and what we
Speaker 1: do and how we do it. So I just believe
Speaker 1: it's it's core to any business, it's core to our industry. Unfortunately,
Speaker 1: it's been core to Russell since the day the Russell
Speaker 1: family opened the doors. Really kind of interesting. Let's discuss
Speaker 1: your strategic partnership with Hamilton's Lane. Tell us about your
Speaker 1: thoughts on private equity and alternatives and what motivated uh
Speaker 1: this new relationship. Well, I think it ties. It ties
Speaker 1: into UM again being agnostic about how you define adding
Speaker 1: value to the clients, right, I mean you you want
Speaker 1: to provide access to every asset, class, capability vehicle UM
Speaker 1: passive versus active that you possibly can in order to
Speaker 1: deliver upon the promise you're making the clients, which is
Speaker 1: to understand their objectives and and deliver access and tailored
Speaker 1: solutions to meet that. UM. Private markets has has grown
Speaker 1: in its criticality to investing and capturing the illiquidity premium,
Speaker 1: especially when you're trying to solve for long dated liabilities
Speaker 1: like you are in a defined benefit plan, like individuals
Speaker 1: are with defined contribution plans. Most people have much longer
Speaker 1: dated time horizons than our industry is measuring for and
Speaker 1: is geared toward and so the lack of exposure to
Speaker 1: private markets to date has been UM a missed opportunity,
Speaker 1: both for institutions as well as individuals, and this was
Speaker 1: an area of UH number one criticality of access in
Speaker 1: a responsible but very broad manner. UM Russell has been
Speaker 1: investing in private markets for decades. So it's not as
Speaker 1: though we were new to the assets space or new
Speaker 1: or to the asset class or introducing it to our clients.
Speaker 1: But we we and I felt the sense of urgency
Speaker 1: to deliver more co investments secondary investments, but do so
Speaker 1: an open architecture format. And so I did start down
Speaker 1: this path frankly fully assuming that we would either acquire
Speaker 1: for capabilities that we felt we needed to ramp more quickly,
Speaker 1: or I would build for it strategically. Partnering for it
Speaker 1: is not the norm, at least for our industry. We
Speaker 1: tend to acquire or build UM, but this is a
Speaker 1: very different time for our industry. And again tying it
Speaker 1: back to the purpose, if our purpose is to deliver
Speaker 1: on financial security UM, the sense of urgency and that
Speaker 1: NED is very very high UM, and so a strategic
Speaker 1: partnership specifically with Hamilton's Lane fit for many many reasons,
Speaker 1: and that is just the full power of a firm
Speaker 1: UH number one that's been doing it for eighty five
Speaker 1: years in total portfolio solutions across all asset classes, paired
Speaker 1: with a firm that's been doing only private markets for
Speaker 1: the last thirty years in an open architecture fashion. So
Speaker 1: looking for the best of breed UH managers in venture,
Speaker 1: private equity, private credit, UM, infrastructure, real estate, UM just
Speaker 1: across the board real assets was incredibly important to us.
Speaker 1: We're not saying that UM Hamilton's Lane is the only
Speaker 1: source of our capabilities. We still have all fiduciary um
Speaker 1: UH power to operate with Hamilton's Lane as well as
Speaker 1: tap into other areas of expertise as we believe that
Speaker 1: we need to. But Hamilton's Lane is a very powerful
Speaker 1: partner for us to offer access as well as manager
Speaker 1: research data and most importantly, risk controls looking across the
Speaker 1: entire UH total portfolio public to private markets. So you know,
Speaker 1: it's it's just an incredibly important time in the industry. UM.
Speaker 1: You've reported I think in in past UM podcast, but
Speaker 1: also I think you might have had Hamilton's Lane CEO
Speaker 1: Mario um on the on the podcast as well. UM,
Speaker 1: but it's it's you know, there are more private companies
Speaker 1: seventeen thousand, to be exact, over a hundred million dollars
Speaker 1: in revenues relative to hundred in the public markets, and
Speaker 1: so limiting yourself to only of the investable large company
Speaker 1: universe if you're only a public markets investor, just makes
Speaker 1: no sense. And so as quickly as we can responsibly
Speaker 1: offer this and democratize access to private markets, UM, with
Speaker 1: the power of Hamilton's Lane, is what we want to do,
Speaker 1: both for the individual Welsh market, UM, but importantly the
Speaker 1: middle market for institutions as well as even large markets. Yeah.
Speaker 1: The the interview with Mario Giannini was October, which is
Speaker 1: what made that jump off the page when I saw
Speaker 1: you guys had a strategic partnership. Let me ask you
Speaker 1: a somewhat related question about a quote of yours. I've
Speaker 1: interviewed a number of female CEOs over the years, Christina
Speaker 1: Hartzeller Zavoya, Gene Hynes at Wellington, Catherine Keating at b
Speaker 1: n Y, Melon, Penny Pennington at Ed Jones, But you
Speaker 1: had to quote that really caught my ear, which involved
Speaker 1: the rarity and responsibility of your position. Could you explain
Speaker 1: what you mean by that? What what is the rarity
Speaker 1: and responsibility of a female CEO in the financial services industry? Well,
Speaker 1: I would say, first, UM, you know, we we all
Speaker 1: know it's a rarity. Um, they're all of the women
Speaker 1: you mentioned, plus many many more are coming through the ranks.
Speaker 1: Kate L. Hillo, I would mention as well, UM, my
Speaker 1: global ce IO that I was proud to bring on
Speaker 1: board from Goldman UM. So I'm very I think we're
Speaker 1: even in more rarefied air to have a woman CEO
Speaker 1: and a woman ce IO UH running a major investment institution.
Speaker 1: So I'm excited about that. But she was the the
Speaker 1: best person for the job. And I think the responsibility
Speaker 1: is too is to give voice to authenticity and two
Speaker 1: certainly learn from every leader and person that you come across.
Speaker 1: And I've had the great benefit of being surrounded by
Speaker 1: mostly men, but wonderful mentors and important leaders, and my
Speaker 1: approach I've felt very self assured in, but it was
Speaker 1: very uniquely mine uh. And I think the responsibility is
Speaker 1: to ensure that you're leading in a way that's authentic
Speaker 1: to you. But I do believe that it makes it UM,
Speaker 1: it makes it a more inclusive conversation. Uh, it makes
Speaker 1: it more focused on outcomes and purpose. And I'm not
Speaker 1: saying that that's a gender specific thing, UM, but but
Speaker 1: I do believe that operating in a manner that takes
Speaker 1: into account the responsibility of the seat is incredibly important
Speaker 1: because people are watching, UM. And whether you're UM, ethnicity
Speaker 1: is different, UM, or your gender is different. You know
Speaker 1: when you're when you're at the table, you you're required
Speaker 1: to speak, and you're required to bring the diversity of thought,
Speaker 1: the diversity of view, and and and make sure that
Speaker 1: you're that your voice flows with the magnitude that it
Speaker 1: should have to represent h your thoughts. UM. You know,
Speaker 1: again constructively, appropriately, collaboratively. UM. But I but I've just
Speaker 1: I actually said somewhere along the way that I've I've sometimes, frankly,
Speaker 1: even most of the times, I didn't notice that I
Speaker 1: was the only along the way because it was more
Speaker 1: about solving the problem than it was about UM individuals
Speaker 1: at the table. So the the the group intellect took
Speaker 1: over more than UM, more than me feeling like the
Speaker 1: spotlight was on me as the only Unfortunately, I'm no
Speaker 1: longer and only, and I think that's just going to
Speaker 1: continue to change it at warp speed. So historically finance
Speaker 1: has been wildly underrepresentative of both women and people of color,
Speaker 1: and it's been a long, slow transition, but it's pretty
Speaker 1: clear that it's been changing. It's still behind where it
Speaker 1: should be, but there can be little doubt that it
Speaker 1: is so much better than it was when I started
Speaker 1: my career twenty five or so years ago. You know,
Speaker 1: we alluded to E s G investing earlier. Let's let's
Speaker 1: talk a little bit about it. There's been some criticism
Speaker 1: about how subjective the screens are. Uh, some end up
Speaker 1: just looking like plain vanilla indexes. What do you say
Speaker 1: to this criticism about the state of environmental, social and
Speaker 1: governance investment? Well, it's burgeoning. Uh, there is no question,
Speaker 1: um that this this is not slowing down in its
Speaker 1: momentum um or its import Uh. And again I believe
Speaker 1: that this one, like many others, is a very complex
Speaker 1: topic that we've tried too hard to simplify into messages
Speaker 1: and products. UM. But I do believe it's only the beginning,
Speaker 1: So I'll start there. Your your question was more about indices,
Speaker 1: and um, the fact that there's been a spotlight on
Speaker 1: UM the understanding of what these various indices or managers
Speaker 1: for that matter, m have actually been been doing. And
Speaker 1: I think that's that that is a responsibility of the
Speaker 1: industry to more effectively communicate both the complexity and the
Speaker 1: transparency of what the indexes do and what they what
Speaker 1: they don't do. So let let me start with that first. First,
Speaker 1: any index gives you a starting point, but the whole topic,
Speaker 1: I mean, we're talking about E, S, g as it
Speaker 1: if it were one thing, it's it's clearly three very
Speaker 1: nuanced and complex um UH desires or impact that one
Speaker 1: wants to have, and not everyone cares equally about the
Speaker 1: E or the S or the g UM. Typically there's
Speaker 1: more of a focus for investors on some component where
Speaker 1: they want their money to have an impact upon society
Speaker 1: or they definitely don't want to be exposed to the risk.
Speaker 1: And so I would say that while indexes give you
Speaker 1: a starting point, you do need to get to the
Speaker 1: core of what UM investors are trying to solve for.
Speaker 1: And so I believe that that UH number one is
Speaker 1: difficult to find out. Number two, it's difficult to fine
Speaker 1: and it's also difficult to measure and it's difficult to predict.
Speaker 1: So we we have we have complexity, we have demand,
Speaker 1: and we have enormous need UM and so the drumbeat
Speaker 1: for the industry and we all take it very seriously,
Speaker 1: is very high to make advancements in e s G.
Speaker 1: Investing and personalizing to those values at scale in a
Speaker 1: manner that goes beyond managing the investment risk, which is
Speaker 1: where I think these indicries get a get a bad rap.
Speaker 1: And the reason I say it that way is that
Speaker 1: you know they are reliant upon data that's disclosed by companies,
Speaker 1: which isn't always disclosed UM, or there isn't clarity of
Speaker 1: the metrics they should be disclosing or the materiality of
Speaker 1: those things. So that's that's fast changing and I know
Speaker 1: that UM the chairman Gendler is very focused on that,
Speaker 1: and we should have something coming out with more guidelines
Speaker 1: in the near future that will be helpful. UM. The
Speaker 1: second main thing within diseases their backward looking and that's
Speaker 1: a problem with the data. Right, so we do have
Speaker 1: a data problem capturing the data from companies. How do
Speaker 1: we define it, how do we measure it? How do
Speaker 1: we define materiality. Then you have the complexity of you know,
Speaker 1: is it is it Scope one? You know Scope two
Speaker 1: or Scope three? You know, is it is it the
Speaker 1: company's own carbon footprint? Is it? How scope to it
Speaker 1: makes its way into uh the distribution UM or the
Speaker 1: client UM and then Scope three as suppliers And so
Speaker 1: this is this is just a it's a fast changing
Speaker 1: critical UH and clearly societal UM demand that I would
Speaker 1: say the desires are out stripping the capabilities at the moment,
Speaker 1: and you've got to go back to how do we
Speaker 1: all make it better? And how are we clear in
Speaker 1: our messaging about what our current tools enable us to
Speaker 1: do versus not and all pause there, But I'd love
Speaker 1: to talk a little bit more about what we're doing
Speaker 1: specifically in that. So let's get into that, because I
Speaker 1: think that's that's really important. How can you make investments
Speaker 1: that are reflective of your values and yet move the
Speaker 1: needle still maintaining decent returns. Well, this this all goes
Speaker 1: back to what I said at the beginning, which is
Speaker 1: um Russell is dominant where the puck is headed UM.
Speaker 1: It's part of the reason I chose and was very
Speaker 1: excited to come on board to lead Russell because I
Speaker 1: do believe we're at the tip of the spear for
Speaker 1: change within the industry and and that is in the
Speaker 1: area of the s G bringing to bear our enormous
Speaker 1: capabilities to focus on the total portfolio across all asset classes,
Speaker 1: agnostic to whether you passively or actively invest. But nowhere
Speaker 1: active investing can lead to the desired outcomes and be
Speaker 1: worth the price that you pay for the act of investing.
Speaker 1: And that is no truer than in E s G.
Speaker 1: And so this is where active engagement UM active data capture.
Speaker 1: I'm not I'm not just avoiding risks or excluding companies
Speaker 1: because of their industry classification, but actively leaning into judgment
Speaker 1: and fundamental analysis and allowing engagement i e. Your investing
Speaker 1: dollars to influence how companies think about UH, their allocation
Speaker 1: of resources and their management to net zero or whatever
Speaker 1: the goals might be. Maybe it's diversity on their board, whatever,
Speaker 1: whatever goals are important to you as an as an investor,
Speaker 1: and you want to move beyond UM climate risk, social risk,
Speaker 1: or governance risk being an investment risk and moved toward
Speaker 1: UH investing with your values and wanting to make more
Speaker 1: of a sustainable, positive impact on the planet, on society UM.
Speaker 1: Whatever the issues, maybe you absolutely have to lean in
Speaker 1: UH to active management because that's the level of engagement
Speaker 1: UH that allows you to UM use your voice and
Speaker 1: your dollars UM to discuss with companies how they will
Speaker 1: change or manage UH their companies to align to those
Speaker 1: goals or not UM and that and that again comes
Speaker 1: down to how you are choosing to build a portfolio
Speaker 1: to that third dimension, and in this case with an
Speaker 1: E s G investor where this is one of their
Speaker 1: highest desires, which is what we find with trustee boards
Speaker 1: and big institutional investors specifically in Europe and in Australia
Speaker 1: and other areas around the country. But coming quickly to
Speaker 1: the US, UM is there um there um bar for
Speaker 1: reporting back to their board on progress that they're making
Speaker 1: on net zero portfolio commitments and the like, not just
Speaker 1: at scope one, but Scope two and Scope three. UM
Speaker 1: is absolutely necessary and we've teamed with people like Planetrics
Speaker 1: and other data providers to really give us that forward
Speaker 1: leaning level of data. And you can only make use
Speaker 1: of that and best use of that through active investing,
Speaker 1: an active engagement really interesting stuff. One of the things
Speaker 1: you said previously I thought was very interesting, which is
Speaker 1: about half of people being born now, Uh, this this
Speaker 1: decade might live to a hundred or longer. What does
Speaker 1: that mean for the economy, What does that mean for
Speaker 1: our health care system? And what does it mean for markets?
Speaker 1: Oh my goodness. We could talk about this one for
Speaker 1: a long time. But I I love the quote, uh
Speaker 1: that demographics is the future that already happened. UM it
Speaker 1: barring UM. You know, outbreaks like the pandemic. UM. We
Speaker 1: we we do know that this this is our this
Speaker 1: is our world UM. And you know, on the on
Speaker 1: the healthcare front, I do sit on a corporate board
Speaker 1: UM sona biotechnology. It's a fascinating, fascinating field to talk
Speaker 1: about UM life spans, but we importantly need to talk
Speaker 1: about the infrastructure around the world to deal with this
Speaker 1: aging demographic UM. And that comes in lots of different forms.
Speaker 1: But but I'll focus it on the work we do,
Speaker 1: which is I envision UM that you know, with increasing lifespans,
Speaker 1: you certainly want UM equally health spans UM, which which
Speaker 1: is very UM dependent upon science and much of the
Speaker 1: work that's being done with with biotech and vaccinations and
Speaker 1: helping this live better lives for longer. But it's also
Speaker 1: ties into what we do, which is I think about
Speaker 1: his wealth spans and ensuring that we could afford to
Speaker 1: live to be a hundred and twenty right, And that
Speaker 1: may not happen for me, but I'm pretty convinced it
Speaker 1: will happen for uh, my kids and that generation. And
Speaker 1: so from from that perspective, you know, it goes back
Speaker 1: to purpose. Um. But but I've talked about this a lot,
Speaker 1: and um you may have seen it in some of
Speaker 1: your work, but you know, it was a couple of
Speaker 1: years ago that the that the UMU Davos reported on
Speaker 1: this that um, there was a seventy trillion dollar existing
Speaker 1: gap in what people need a retirement versus what they
Speaker 1: have and growing quickly just because of demographics and math
Speaker 1: to four hundred trillion by now. Those numbers are so big.
Speaker 1: I see that people just like their eyes gloss over,
Speaker 1: and so I always try to make things relative, to
Speaker 1: make it, to make it relative to something, and put
Speaker 1: it in context that that that annual gap is equal
Speaker 1: to a hundred and fifty percent of the developed world's GDP.
Speaker 1: So it's a huge number, uh, that we cannot afford
Speaker 1: to ignore, and we also cannot have afford to ignore
Speaker 1: that we are retirement infrastructure uh was was set up
Speaker 1: at the late eighteen hundreds and then reaffirmed during the
Speaker 1: Depression when most people didn't live past sixty. So it's
Speaker 1: never We've never funded as a society, nor did we
Speaker 1: ever intend for people not to be productive uh, productive
Speaker 1: citizens for nearly of their lives. I mean we we
Speaker 1: just we just can't can't do that, and we also
Speaker 1: need to have infrastructures that that can accommodate that. So
Speaker 1: it uh, it's a it's a big question. Uh, it's
Speaker 1: deserving of solving, which is why I talked so much
Speaker 1: about outcomes. I do believe in financial literacy. It's part
Speaker 1: of why this became a very personal UM endeavor for
Speaker 1: me is making sure that people understood the power of
Speaker 1: compound interests. They understood the power of leveraging their hard
Speaker 1: working activities to provide for their financi security. UM. That
Speaker 1: went for my family, but also UM a lot of
Speaker 1: other people that I've counseled over my thirty five year career. UM.
Speaker 1: But but you can't you can't educate someone out of
Speaker 1: a crisis. And I would say for our aging boomer generation.
Speaker 1: It absolutely is a crisis that will pay for as
Speaker 1: a society because it's the only way we can pay
Speaker 1: for it. UM. But it's the next generation and the
Speaker 1: generation after that that we need to interrupt the pattern.
Speaker 1: And that's why I feel so strongly about making innovation
Speaker 1: within the industry centered around client needs because it's quickly
Speaker 1: as we can help people understand in real time what
Speaker 1: they have, what they need, how long they need to work,
Speaker 1: and define what their goals are, the quicker we can
Speaker 1: put them on the path to financial resilience and enable
Speaker 1: them to be empowered with data so that they can
Speaker 1: make better choices for themselves. And we have not done
Speaker 1: that well as an industry. And I'm very excited for
Speaker 1: all the things we've been talking about in terms of
Speaker 1: manufacturing and access, but I'm even more excited about having
Speaker 1: an interface with the clients that allows them to um
Speaker 1: to not be educated in a finance degree or an
Speaker 1: investment degree or go get a c f A. In
Speaker 1: order to figure out the complexity that we've made of
Speaker 1: this system while still not solving the root caused problem
Speaker 1: of financial security for people around the world, really intriguing
Speaker 1: UM so so let's take that concept of the gap
Speaker 1: in retirements savings and talk a little bit about the
Speaker 1: lowered expected returns we see in the public markets. What
Speaker 1: are your thoughts on other alternatives We briefly touched on
Speaker 1: private equity. What are your thoughts on on pe on
Speaker 1: venture capital and hedge funds as a way to offset
Speaker 1: possibly lower returns from stocks and bonds. Absolutely critical UM
Speaker 1: we should we should allow and avail our clients of
Speaker 1: responsible access within their parameters and goals, responsible access to
Speaker 1: as many forms of UM of investing as possible. And
Speaker 1: certainly the advancements that are being made UM in the
Speaker 1: you know, I don't want the conversation to go off
Speaker 1: in these areas, but the the advancements that are being
Speaker 1: made UM with um UM access to potentially different asset
Speaker 1: classes that may grow over time through UH digitization, through
Speaker 1: blockchain AP peer to peer investing, I think are very exciting.
Speaker 1: And while they're highly speculatives and pockets at the moment,
Speaker 1: I do believe that that also is a course of
Speaker 1: technological change that will influence positively access to lots of
Speaker 1: different vehicles and asset classes that haven't existed today. But
Speaker 1: the here and now is very real in alternatives, I
Speaker 1: really don't even like that term because it's such a
Speaker 1: it's such a big category that gets lumped into one bucket,
Speaker 1: and the individual asset classes underneath alternatives quote unquote couldn't
Speaker 1: be more different. UM. But the the other reason I
Speaker 1: don't like it is we've traditionally talked about portfolio construction
Speaker 1: as a sixty forty you know, balanced mix of you know,
Speaker 1: stocks and bonds, and then we bolt on alternatives, and
Speaker 1: that's just not how we construct portfolios today, and it's
Speaker 1: not how any portfolio for an individual should be constructed.
Speaker 1: So it should tap in to everything that you mentioned
Speaker 1: as appropriate. We use hedge funds, venture real assets, real estate,
Speaker 1: private credit, private UM, private equity, so all forms co
Speaker 1: investment secondaries have to be managed very purposely UM, but
Speaker 1: with a risk control and an understanding of how those
Speaker 1: various parts of the portfolio actually work together. So, for instance,
Speaker 1: you don't want to spend all of that money and
Speaker 1: alpha exposure to a private equity managers say it's a
Speaker 1: growth equity manager, for instance, and not know how it
Speaker 1: relates to your public markets or your factor exposures or
Speaker 1: your indexing exposures. And most risk systems have not incorporated
Speaker 1: a total portfolio view so that you understand those exposures
Speaker 1: down to the individual level. What we've done instead is
Speaker 1: just put a risk a liquidity or illiquidity risk premium
Speaker 1: on many of these other asset classes and alternatives, and
Speaker 1: that's that's just a very blunt tool that we've outgrown,
Speaker 1: and so all of our efforts, again powered with the
Speaker 1: partnership with Hamilton Lane, but wife felt a sense of
Speaker 1: urgency to do it. This will be a critical area
Speaker 1: to tap into in order to solve for this societal
Speaker 1: financial resilience or financial security need and not availing yourself
Speaker 1: in a responsible way so that all investors can gain
Speaker 1: access either through their employer plans, even if it's a
Speaker 1: small or midsize employer um or eventually we're not there
Speaker 1: yet um but eventually tap into it through the wealth channel.
Speaker 1: We've given people access, we haven't, in my opinion, yet
Speaker 1: given them all of the tools to ensure that they
Speaker 1: have responsible access and they understand how alternatives broadly speaking,
Speaker 1: exposure is inter relating with the other investments that they've
Speaker 1: already made in their portfolios. Really intriguing and as long
Speaker 1: as we're talking about the state of investing today. What
Speaker 1: are your thoughts on things like defy and crypto. Do
Speaker 1: they have a place in investors portfolios? Or is this
Speaker 1: still too new and speculative UM twofold answer The first
Speaker 1: is when we talk about crypto, uh, there clearly our
Speaker 1: speculative bubbles UM, and I think unfortunately the conversation, whether
Speaker 1: it be around doage coin or bitcoin, distracts from the
Speaker 1: innovation that truly is occurring within UM, the technology and
Speaker 1: the platforms and the concept of peer to peer networks.
Speaker 1: So UM, I think you've had several guests on over
Speaker 1: time UM and and and lots of discussion taking place
Speaker 1: in the industry. I believe it's real. I believe it
Speaker 1: will be incredibly disruptive to the ecosystem, but I believe
Speaker 1: that it will be very additive and ultimately the core
Speaker 1: of innovation efforts as we move forward. However, like any
Speaker 1: um burgeoning field, and again again I aged myself back
Speaker 1: in the eyeball days of where every company was launching.
Speaker 1: It was highly speculative. Everyone thought that bricks and mortar
Speaker 1: businesses were going to go out of business, and it
Speaker 1: just wasn't It wasn't true. It was that every company
Speaker 1: needed to figure out how to incorporate the Internet. There
Speaker 1: weren't necessarily standalone Internet companies that truly turned the world
Speaker 1: upside down. There were a few, but they blended both
Speaker 1: the traditional business models with the new business models. And
Speaker 1: I do believe that that will be the outcome, and
Speaker 1: it will be a good outcome of the advancements that
Speaker 1: are being made with technology at its core for the finance,
Speaker 1: UH and investment industry. But I believe it's a it's
Speaker 1: um higher level impact than simply um distilling it down
Speaker 1: to cryptocurrencies. Um. But I but I do believe that
Speaker 1: there are there places for lots of innovation within the industry.
Speaker 1: We haven't incorporated crypto into our strategic asset allocation for
Speaker 1: our for our dB plans, we still deem it to
Speaker 1: be early innings, but clearly there will be a lot
Speaker 1: of winners and a lot of carnage along the way.
Speaker 1: And I would just differentiate speculation from responsible innovation within
Speaker 1: the industry, and I think both are occurring right now
Speaker 1: in that segment. So I know I only have you
Speaker 1: for a limited amount of time. Let me jump to
Speaker 1: my favorite questions that I ask all of our guests,
Speaker 1: starting with especially these days, since it looks like we're
Speaker 1: going back, um into more defensive crouch with COVID. Tell
Speaker 1: us what you're streaming these days? What's keeping you entertains
Speaker 1: at home? Um? Well, several things. We're a big podcast,
Speaker 1: uh family. Um. But but since you mentioned longevity and
Speaker 1: health spans Peter Atilla, the Drive is one that I
Speaker 1: listened to with regularity. Um. The other one, uh is
Speaker 1: Sam Harris. He has a couple of different apps. One
Speaker 1: it's making Sense, but the one I listened to with
Speaker 1: equal regularity is Waking Up, which is a meditation philosophy
Speaker 1: app um, which I find very interesting. And since it's
Speaker 1: top of mine, I'll give you the guilty pleasure one.
Speaker 1: While I was rapping gifts last night for my uh,
Speaker 1: for my for my kids and my family, I was
Speaker 1: watching the latest episode of Succession. I'm a season behind it,
Speaker 1: and I don't think I've ever seen a show where
Speaker 1: there isn't a single care Do you actually like everybody
Speaker 1: is just such a contemptible human being? Exactly? Um, let's
Speaker 1: talk about let's talk about mentors who helped shape your career. Um, well,
Speaker 1: you know for most people, uh, and for me as well.
Speaker 1: It's it starts with with my family. My father was
Speaker 1: UM was an instrumental figure in my life. I lost
Speaker 1: him six years ago. UM, but he was my my
Speaker 1: best friend, my confidant, uh in in my career, in
Speaker 1: my life, but also my mother. Early mentor in hard
Speaker 1: work and the human aspect of approaching of approaching business. UM.
Speaker 1: But but I would say early mentors from just a
Speaker 1: pure career standpoint, I had many. I learned from everybody.
Speaker 1: I feel like I still have mentors, and I know
Speaker 1: you're asking about early, but I really it's equal opportunity.
Speaker 1: When I think about mentors, I would say probably one
Speaker 1: of the most pivotal ones that you think of in
Speaker 1: a traditional sense though, would be Conrad Fisher UM, who
Speaker 1: is one of the greatest investors that frankly the world
Speaker 1: doesn't know. But he UM is phenomenal and was my
Speaker 1: predecessor um as um as head of William Blair Investment
Speaker 1: Management and very responsible for for many of the things
Speaker 1: I went on to grow from and impact while I
Speaker 1: was at Blair. But UM continues on to this day.
Speaker 1: So but I would say I find mentors everywhere, UM
Speaker 1: below me next to me, UM, I'm able to learn
Speaker 1: from everyone, and I seek to learn from everyone. Really interesting.
Speaker 1: Let's let's talk about books. What are some of your
Speaker 1: favorites and what are you reading right now? Reading right
Speaker 1: now is the code breaker Jennifer Dubna on gene editing,
Speaker 1: So that foots a little bit, um with my board
Speaker 1: director role with Sona Biotech. And then favorites. Um, I
Speaker 1: would say, you know, favorites I define as I dog
Speaker 1: ear them. It drives my husband crazy. I highlight them,
Speaker 1: my dog ear them, and I actually end up buying
Speaker 1: a second one, So I don't ruin it. Um. But
Speaker 1: I would say sapiens. I've always come back to fact fullness. Um.
Speaker 1: Hans rose Lane Um is a wonderful book, UM and UM.
Speaker 1: And I referenced that a lot. And then anything that
Speaker 1: Danny Kahneman writes or talks about I love. UM. So
Speaker 1: those are some of the favorites. That's a great list.
Speaker 1: Let's talk about advice to a college grad who might
Speaker 1: be interested in a career in investment management or finance.
Speaker 1: I would still say go for it, um. You know,
Speaker 1: just like I felt when I came in an that
Speaker 1: the best had already passed me and I missed the
Speaker 1: you know, threefold increase in the Del Jones industrial average.
Speaker 1: You know the end was near. UH, it never is.
Speaker 1: And I do believe that investing and finances core UH
Speaker 1: to capitalism. I believe it's core to a growing economy,
Speaker 1: and I believe it's core to solving societal needs. So
Speaker 1: it's not going away. I would encourage UM anyone coming
Speaker 1: into the field UH to drive change, ask better questions,
Speaker 1: and solve for really big problems in a way that
Speaker 1: people can live better lives because of your efforts. Really
Speaker 1: quite intriguing, and our final question, what do you know
Speaker 1: about the world of investing today? You wish you knew
Speaker 1: thirty five years or so ago when you were first
Speaker 1: getting started. UM, I would say, I might be repeating myself,
Speaker 1: but but I I really wish that I understood thirty
Speaker 1: years ago how critical it was that we solve for
Speaker 1: the right problems, the biggest problems, and and make it
Speaker 1: scalable so clients could actually execute it. And so I
Speaker 1: derived a great deal of personal satisfaction sitting across from
Speaker 1: kitchen tables and making a difference in individual people's live
Speaker 1: I didn't understand how urgent that need really was. Again
Speaker 1: at scale like that. The the high net worth business
Speaker 1: was always considered a practitioner business, and it wasn't scalable.
Speaker 1: Wealth management wasn't as attractive as institutional management because it
Speaker 1: wasn't scaleable ball And now all of the innovation that
Speaker 1: we're seeing today is exactly that. So I wish all
Speaker 1: of us had understood thirty years ago how critical that
Speaker 1: need was going to be with an aging demographic and
Speaker 1: how fast the clock was ticking. I wish we would
Speaker 1: have done things differently versus, you know, being so concentrated
Speaker 1: on putting all of our R and D dollars into
Speaker 1: beating benchmarks, which which helped some people, but it didn't
Speaker 1: help as quickly as it needed to. Quite quite interesting.
Speaker 1: Thank you Michelle for being so generous with your time.
Speaker 1: We have been speaking with Michelle sites. She is the
Speaker 1: chairman and CEO of Russell Investments. If you enjoy this conversation,
Speaker 1: well check out any of the previous four hundred or
Speaker 1: so we've done over the past eight years. You can
Speaker 1: find the was at iTunes, Spotify, wherever you find your
Speaker 1: favorite podcasts. We love your comments, feedback and suggestions right
Speaker 1: to us at m IB podcast at Bloomberg dot Net.
Speaker 1: Sign up for my daily reading list at hults dot com.
Speaker 1: Follow me on Twitter at Ridholtz. I would be remiss
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Speaker 1: research director. I'm Barry Halts Human listening to Masters in
Speaker 1: Business on Bloomberg Radio