WEBVTT - Michelle Seitz on Alternative Investments (Podcast) 0:00:00.080 --> 0:00:06.080 M This is Mesters in Business with very Renaults on 0:00:06.240 --> 0:00:10.799 Bluebird Radio. This week on the podcast, I have an 0:00:10.840 --> 0:00:15.960 extra special guest. Michelle Sites runs Russell Investments. She's chairman 0:00:16.040 --> 0:00:21.080 in chief executive Officer. Russell is a investing giant. They 0:00:21.120 --> 0:00:25.240 manage three thirty billion dollars or more. They do almost 0:00:25.280 --> 0:00:29.120 three trillion dollars a year in annual trades. They advise 0:00:29.240 --> 0:00:33.360 on another two point eight trillion dollars. UH. They're just 0:00:33.440 --> 0:00:37.440 a giant firm. About half of their business comes from overseas, 0:00:37.520 --> 0:00:42.720 from outside of the US. She is a highly regarded 0:00:42.840 --> 0:00:47.080 executive and a member of a small club of women 0:00:47.120 --> 0:00:50.600 who run giant asset management firms. We talk a little 0:00:50.640 --> 0:00:54.880 bit about that. We talk about how they've expanded out 0:00:54.920 --> 0:01:00.800 of beta and and indexing into a broader range of investing. 0:01:01.000 --> 0:01:04.240 Outsourced c I o IS is a large and fast 0:01:04.240 --> 0:01:09.000 growing business line of THEIRS, as well as alternative investments, 0:01:09.000 --> 0:01:13.040 and how they're expanding their platform to include that. UH. 0:01:13.080 --> 0:01:19.679 This is really a very much investing industry conversation if 0:01:19.720 --> 0:01:22.720 you're at all interested in what it's like to run 0:01:22.760 --> 0:01:26.600 a giant UH company that's in dozens and dozens of 0:01:26.640 --> 0:01:30.680 countries and have thousands and thousands of employees. You're gonna 0:01:30.720 --> 0:01:34.400 find this to be absolutely fascinating. So, with no further ado, 0:01:35.000 --> 0:01:41.560 my conversation with Michelle Sites of Russell Investments. This is 0:01:41.720 --> 0:01:47.039 mesters in Business with very Renaults on Bluebird Radio. My 0:01:47.400 --> 0:01:51.000 extra special guests this week is Michelle Sites. She is 0:01:51.080 --> 0:01:54.960 the chairman and chief executive officer of Russell Investments. The 0:01:55.040 --> 0:01:58.880 firm manages over three d thirty one billion dollars, with 0:01:58.960 --> 0:02:03.040 an additional two point eight trillion under advisement. They trade 0:02:03.440 --> 0:02:06.600 over two point six trillion dollars in equities a year. 0:02:07.120 --> 0:02:11.000 Half of their revenues comes from outside of the United States. 0:02:11.639 --> 0:02:15.080 Michelle Sites is a member of all the usual lists 0:02:15.440 --> 0:02:18.600 Most Powerful Women in Finance, the Power one hundred, Most 0:02:18.720 --> 0:02:22.440 Influential Women in US Finance. I'll stop right there, but 0:02:22.680 --> 0:02:27.320 we'll add Michelle Sites. Welcome to Bloomberg Berry. Thank you 0:02:27.440 --> 0:02:29.880 very much for having me. So let me jump to 0:02:29.919 --> 0:02:33.680 my first question. So you spent about twenty one years 0:02:33.680 --> 0:02:37.239 at William Blair. Tell us a little bit about how 0:02:37.280 --> 0:02:41.600 you got into the finance industry. Sure, sure, Um, well, 0:02:41.639 --> 0:02:46.560 going going back, Um, I decided early on that it 0:02:46.680 --> 0:02:49.680 was what I wanted to do, so before I applied 0:02:50.360 --> 0:02:53.919 to colleges, I decided that I wanted to go into business, 0:02:53.960 --> 0:02:58.000 and that was the cumulative impact of several things. Like 0:02:58.080 --> 0:03:03.680 many people in life, influenced by my parents. UM. First, 0:03:03.800 --> 0:03:09.320 my my father was very influential in my formative years, 0:03:09.360 --> 0:03:14.160 but especially as it revolved around business and dealing with people. 0:03:14.320 --> 0:03:18.440 He was a second generation entrepreneur, and from the age 0:03:18.480 --> 0:03:22.120 of twelve I worked by his side after school on 0:03:22.160 --> 0:03:27.919 the weekends during summer, and he really was quite impactful, 0:03:28.560 --> 0:03:32.840 and how I decided to pursue a degree in which 0:03:32.880 --> 0:03:36.880 college to go to UM. On the On the flip side, 0:03:37.080 --> 0:03:40.720 my my mother was very influential, and I would say 0:03:40.760 --> 0:03:43.640 more from the standpoint of the impact I wanted to 0:03:43.680 --> 0:03:47.560 have and and kind of I guess I would say 0:03:47.640 --> 0:03:53.440 control UM for financial stability. She worked very hard, but 0:03:53.560 --> 0:03:56.560 it was a long and difficult path for her. My 0:03:56.680 --> 0:03:59.880 parents divorced when I was young, and so I just 0:04:00.200 --> 0:04:05.800 I saw firsthand UM the need UH to leverage people's 0:04:05.840 --> 0:04:10.040 hard work and drive them toward financial security. And so 0:04:10.120 --> 0:04:14.000 I wanted to master money, I guess is the best 0:04:14.280 --> 0:04:16.440 the best way to phrase it. So I read all 0:04:16.520 --> 0:04:21.000 those money master books by I think it was John Train, buffet, 0:04:21.040 --> 0:04:24.880 shareholder letters, um et cetera. But I was just fascinated 0:04:24.960 --> 0:04:29.000 with the miracle of compound interest and the like. But 0:04:29.000 --> 0:04:33.039 but really what hooked me on investing was a high 0:04:33.040 --> 0:04:36.240 school field trip. Um So. I grew up in a 0:04:36.279 --> 0:04:39.880 small town in Indiana. We took a bus trip to Chicago. 0:04:40.880 --> 0:04:44.080 It was with my advanced chemistry class actually, and the 0:04:44.120 --> 0:04:47.479 main show was the Museum of Science and Industry, but 0:04:47.600 --> 0:04:52.000 we took a quick detour fortuitously for me, at the 0:04:52.080 --> 0:04:55.520 Chicago Board of Trade, and I was hooked. I love 0:04:55.640 --> 0:05:00.359 the passion, the energy from the floor and when I 0:05:00.440 --> 0:05:04.119 decided that investing was what I wanted to do, so 0:05:04.400 --> 0:05:09.240 um so that that set me on my trajectory early on, 0:05:09.360 --> 0:05:13.840 and before I even set off for college. So interestingly, 0:05:14.040 --> 0:05:18.080 post college, one of your first jobs in finance was 0:05:18.279 --> 0:05:22.679 in I've had a few guests who began their career 0:05:23.320 --> 0:05:26.800 the year the market took that horrific crash. Tell us 0:05:26.839 --> 0:05:30.120 about what that was like. Uh so early in your career. 0:05:30.160 --> 0:05:33.520 What do you remember from that? Yeah, well, it was 0:05:33.760 --> 0:05:37.360 you know, baptism by fire. So I had just graduated. 0:05:37.800 --> 0:05:41.880 Um I loaded up all my my worldly goods in 0:05:41.960 --> 0:05:46.560 a U haul and drove down to Charlotte, North Carolina 0:05:46.680 --> 0:05:50.919 to work with what was then MCNB, which turned into 0:05:51.120 --> 0:05:55.560 Nation's Bank and Bank America. Um but um, but it 0:05:55.600 --> 0:06:00.120 was a phenomenal culture. So I stepped foot into the 0:06:00.160 --> 0:06:06.000 investment industry in June of so a few months before 0:06:07.080 --> 0:06:10.800 the Baptism by Fire. Um. But but I would say 0:06:10.839 --> 0:06:14.040 the first leading up to that, I will just say 0:06:14.080 --> 0:06:16.320 what I remember the most about that year, as it 0:06:16.360 --> 0:06:20.320 was a tale of all kinds of uh cities. Um. 0:06:20.760 --> 0:06:23.839 The first was I thought I'd missed it, right. I mean, 0:06:24.000 --> 0:06:26.800 we had a tremendous bowl market from eight two to 0:06:26.960 --> 0:06:30.719 eighty seven. The del Jones had tripled, and I would 0:06:30.760 --> 0:06:34.520 sit there and talk with the veterans of the industry. 0:06:34.720 --> 0:06:37.000 All you know, I was younger by a factor of 0:06:37.080 --> 0:06:42.320 ten years anyone else managing money. Um. But I really 0:06:42.320 --> 0:06:45.840 did think that I missed it. That you know, this 0:06:45.960 --> 0:06:48.640 was the best we'd we'd ever had, and you wonder 0:06:48.680 --> 0:06:51.560 how much better it could get? And then you quickly 0:06:52.279 --> 0:06:56.520 found yourself or I found myself uh in Baptism by 0:06:56.600 --> 0:07:01.120 Fire Um with that faithful day which was Black Monday, 0:07:01.160 --> 0:07:06.200 October nineteenth, when the market fell in a single day 0:07:06.240 --> 0:07:09.039 and I'll age myself with this story, but what I 0:07:09.240 --> 0:07:14.520 what I remember most were the lines at the quotron. 0:07:14.680 --> 0:07:19.600 Do you remember quotron? So quotrons you had to you 0:07:19.640 --> 0:07:23.160 didn't have anything at your desk, and you didn't have 0:07:23.240 --> 0:07:26.840 twenty four or seven TV. So you did line up 0:07:26.840 --> 0:07:30.400 at a quotron UM, which were stationed in each of 0:07:30.440 --> 0:07:34.880 the major corners of the of the trading desk and 0:07:34.960 --> 0:07:38.360 the in the hallways, and you punch in your ticker symbols. 0:07:38.520 --> 0:07:41.800 And I remember I was dutifully punching in my ticker 0:07:41.880 --> 0:07:45.600 symbols because even with only three months under my belt, 0:07:45.720 --> 0:07:50.560 I was managing UM a few hundred million dollars UM 0:07:50.880 --> 0:07:54.480 and so I was very busy focused on not losing 0:07:54.520 --> 0:07:56.880 my client's money and how to lean in and make 0:07:56.920 --> 0:08:00.840 them money. And behind me stood the CEO of the 0:08:00.880 --> 0:08:08.000 bank UM. He was quite an imposing figure within financial services, 0:08:08.000 --> 0:08:10.720 but Hugh McCall, and he was asking me all kinds 0:08:10.720 --> 0:08:13.800 of questions, and I was, you know, being very serious 0:08:14.080 --> 0:08:17.200 and uh answering them all without turning around and looking 0:08:17.240 --> 0:08:20.800 at who was posing the question the questions to me. 0:08:20.880 --> 0:08:23.240 And I was, you know, I was twenty three years old, 0:08:23.880 --> 0:08:27.560 and UM he Finally, he finally said, who are you 0:08:27.640 --> 0:08:33.800 and what do you do? What do you do here? Started? Yeah, 0:08:33.880 --> 0:08:38.120 I started rattling off my resume and he said, he said, 0:08:38.240 --> 0:08:42.400 what qualifies you to manage money? Which was a which 0:08:42.480 --> 0:08:45.679 was a legitimate question, you know, three months three months 0:08:45.679 --> 0:08:49.439 out of school. Um. But but anyway, I guess, I 0:08:49.440 --> 0:08:54.440 guess that baptism by fire and uh and being being 0:08:54.480 --> 0:08:57.040 asked the question what does qualify you to do? This 0:08:57.200 --> 0:09:03.040 had had me take it incredibly seriously. UM. I number 0:09:03.080 --> 0:09:07.240 one understood that this is this is real money for 0:09:07.360 --> 0:09:12.280 real people who have real needs, and the emotions of people, 0:09:12.880 --> 0:09:16.439 UM can be the greatest destroyers of wealth. And as 0:09:16.480 --> 0:09:20.120 a professional investor, that's what you've got to learn to 0:09:20.960 --> 0:09:27.160 um harness or eliminate from the decision making process. UM. 0:09:27.200 --> 0:09:30.520 But it also made it the purpose of the industry 0:09:30.640 --> 0:09:34.600 quite real to me, very very fast. So when you're 0:09:35.040 --> 0:09:39.600 talking with people who really are fearful of being able 0:09:39.679 --> 0:09:43.120 to retire, being able to send kids to college, the 0:09:43.160 --> 0:09:46.040 markets are in a free fall. It was it was 0:09:46.080 --> 0:09:49.839 a very good baptism by fire. UM. So I'm glad 0:09:49.920 --> 0:09:53.280 I saw what I thought was the peak. I'm glad 0:09:53.320 --> 0:09:59.240 I was was so early in my career trajectory that 0:09:59.360 --> 0:10:03.440 I under stood that this wasn't a game, UM, and 0:10:03.600 --> 0:10:07.960 I'm glad that I was that close to the clients 0:10:08.120 --> 0:10:12.480 rather than being disintermediated, you know with a mutual fund 0:10:12.559 --> 0:10:16.360 where you never talked with the end clients UM as much, 0:10:16.400 --> 0:10:18.960 and so it just made it. It made it very serious. 0:10:19.000 --> 0:10:23.559 It made it very real, very quickly, and you received 0:10:23.600 --> 0:10:27.200 the firm's Rookie of the Year award. Tell us about that, 0:10:27.800 --> 0:10:32.040 Oh well, UM, well that was fun. It was. It was. 0:10:32.679 --> 0:10:37.600 There was a big celebration on the top floor of 0:10:37.640 --> 0:10:42.160 the building. Hugh came, UM, all of the executive team 0:10:42.240 --> 0:10:48.599 came to celebrate the top investment performers in the investment 0:10:48.600 --> 0:10:53.040 division and so UM I was invited to that. It 0:10:53.120 --> 0:10:57.320 was my first it was my first year UM, and 0:10:57.920 --> 0:11:00.960 I would say that, you know, I didn't I understand 0:11:01.080 --> 0:11:05.760 the import of it, to be honest, until several very 0:11:05.840 --> 0:11:10.199 senior portfolio managers came up and said, you do understand 0:11:10.200 --> 0:11:14.240 how important it is to be seen here, right, And 0:11:14.520 --> 0:11:17.520 I said, of course, but I really I really didn't. 0:11:17.559 --> 0:11:21.080 But it was most important, I would say, for my 0:11:21.200 --> 0:11:26.360 street cred to be part of that UM, to be 0:11:26.440 --> 0:11:33.240 part of that group and to give me credibility, especially 0:11:33.840 --> 0:11:41.880 given you know my um, disproportionate youth, uh and frankly inexperience. 0:11:41.920 --> 0:11:44.760 I mean I did do well. One year does not 0:11:45.640 --> 0:11:50.439 prove skill, to be quite frank but um, thirty five years. 0:11:50.440 --> 0:11:54.920 Hence I think I learned a lot from that time period. Um. 0:11:54.960 --> 0:11:59.480 And I was a student too of of the I 0:11:59.520 --> 0:12:03.319 would say, of the profession, and so that was very 0:12:03.480 --> 0:12:07.000 very helpful to me. And understanding how important it was 0:12:07.040 --> 0:12:10.240 to deliver on the value proposition to the clients and 0:12:10.280 --> 0:12:14.440 have it celebrated in the way that they did was 0:12:14.440 --> 0:12:18.480 was really important, but it was it was a great way. Frankly, 0:12:18.559 --> 0:12:21.960 the crash and being Rookie of the Year was a 0:12:22.200 --> 0:12:24.880 was a great way to start my career. So the 0:12:24.960 --> 0:12:27.160 first I don't know if I should call it half, 0:12:27.160 --> 0:12:30.280 but certainly the first part of your career. You're on 0:12:30.320 --> 0:12:34.319 the asset management side. You eventually rise to the leadership 0:12:34.520 --> 0:12:37.960 of William Blair and now you serve as CEO of 0:12:38.000 --> 0:12:43.160 Russell Investments. How did managing assets and being part of 0:12:43.160 --> 0:12:47.800 a larger corporate entity helped prepare you for your present 0:12:47.920 --> 0:12:51.640 leadership role. That's a really good question, especially the way 0:12:51.679 --> 0:12:56.360 you phrase it, um, you know, not not many people 0:12:56.600 --> 0:13:04.439 ask me about the similar charities or the leverage from 0:13:04.480 --> 0:13:11.160 being an investor to being a leader. UM. So so 0:13:11.200 --> 0:13:13.920 that's a poignant question because I think I think there 0:13:13.960 --> 0:13:17.880 are strong similarities. UM. You know. First of all, I 0:13:17.920 --> 0:13:23.319 would say that just what energizes me aligns to the role, 0:13:23.920 --> 0:13:27.520 both the investing role as well as the leadership role. 0:13:27.600 --> 0:13:32.360 And so I would say that solving solving problems energizes me. 0:13:32.640 --> 0:13:37.239 Trying to figure out what the root cause UH problems 0:13:37.400 --> 0:13:42.640 are and making sure that there's a there's a level 0:13:42.679 --> 0:13:48.280 of human connection that makes the work meaningful. UM. It 0:13:48.520 --> 0:13:54.360 inspires me. And so I think that just as a touchstone, UM, 0:13:54.360 --> 0:13:58.559 that's that's been critically important both to being able to 0:13:58.600 --> 0:14:02.680 be a lifelong learner as an investor, um, but also 0:14:03.160 --> 0:14:06.280 as a as a leader in a people and knowledge 0:14:06.280 --> 0:14:10.600 worker industry. UM. The second, the second thing I would 0:14:10.640 --> 0:14:13.600 say is that as a as a PM as an investor, 0:14:14.400 --> 0:14:20.880 where I was most additive two my peer discussions. I 0:14:20.920 --> 0:14:25.240 do believe investing as a team sport and UM, you 0:14:25.320 --> 0:14:31.400 make each other better by coming at problem solving and 0:14:31.480 --> 0:14:36.080 the puzzle of investing with different perspectives and and mine 0:14:36.600 --> 0:14:41.720 was um that I was a very structured and strategic thinker. 0:14:42.560 --> 0:14:48.120 UM I could do the analyst role and the modeling role, 0:14:48.200 --> 0:14:52.840 but it didn't excite me as much as digging into 0:14:53.720 --> 0:14:58.160 the problem that a company was solving for and how 0:14:58.640 --> 0:15:02.840 was it creating a durab both sustainable franchise that was 0:15:03.120 --> 0:15:07.880 frankly in some large way additive to society and filling 0:15:08.440 --> 0:15:12.560 a societal need. And so that that was really what 0:15:12.680 --> 0:15:17.600 I enjoyed, and it aligns very much with being a 0:15:17.720 --> 0:15:21.440 CEO as well, and so I think I think that 0:15:21.560 --> 0:15:25.360 part was very important. I think also just being data 0:15:25.480 --> 0:15:32.280 driven in your decision making, but being very understanding of 0:15:32.480 --> 0:15:38.080 how important people and teams are, whether they be management 0:15:38.120 --> 0:15:41.680 teams for the companies that you're investing in UM or 0:15:41.760 --> 0:15:45.960 the culture of an organization, or the ability to execute 0:15:46.520 --> 0:15:49.920 on a strategic plan, all has to be with a 0:15:50.040 --> 0:15:55.240 very strong people component and the desire and and understanding 0:15:56.000 --> 0:15:59.800 of the import of human connection. And I think that 0:16:00.200 --> 0:16:04.760 as an investor as well as a leader, I've hopefully 0:16:05.440 --> 0:16:08.720 been able to marry those two in a very in 0:16:08.760 --> 0:16:14.680 a very real way. Let's talk a little bit about Russell, 0:16:14.960 --> 0:16:19.880 which I used to associate with indexes the Russell two thousand, 0:16:19.960 --> 0:16:24.640 most famously, but that's no longer the focus of your business. 0:16:24.720 --> 0:16:29.400 That that particular line was sold a couple of years ago. 0:16:29.600 --> 0:16:32.560 Tell us a little bit about your current state of 0:16:32.560 --> 0:16:38.480 your business, who your clients, and what is your key focus? Sure, um, well, 0:16:38.560 --> 0:16:41.840 I would say that the as an investor, the most 0:16:41.880 --> 0:16:45.760 insightful questions you could ever ask a management team is 0:16:46.040 --> 0:16:48.960 is tell me about how the firm started and how 0:16:49.000 --> 0:16:51.080 you got to where you are. So I won't do 0:16:51.120 --> 0:16:54.240 a whole a whole history of Russell, but the fact 0:16:54.280 --> 0:16:57.480 that you bring up the indicase is a pretty critical 0:16:57.640 --> 0:17:04.040 part of who Russell is today and and where the 0:17:04.160 --> 0:17:08.480 um competitive advantage comes from. So so let me start there. 0:17:08.880 --> 0:17:12.320 You know, we're eighty five years young, um, and Frank 0:17:12.400 --> 0:17:16.480 Russell opened the doors of our firm. Uh. And he 0:17:16.680 --> 0:17:21.119 did so, um under the umbrella of investing, you know, 0:17:21.200 --> 0:17:25.199 for people's financial security. So he started with individuals. But 0:17:25.359 --> 0:17:30.960 his grandson, George Russell, really was a pioneering spirit. That's 0:17:31.000 --> 0:17:36.600 true generally now that I lived there of the Pacific northwest. Um. 0:17:36.680 --> 0:17:41.600 But but where we where we developed, uh, the indices 0:17:41.720 --> 0:17:44.679 along the way was really at the core of what 0:17:44.800 --> 0:17:48.480 makes the firm tick, and that's putting client problems at 0:17:48.480 --> 0:17:52.119 the center of innovation. And so we we did start 0:17:52.160 --> 0:17:56.359 with pension consulting, so we we were a pioneer in 0:17:56.400 --> 0:18:01.000 developing the pension consulting world. Uh, then we moved on 0:18:01.960 --> 0:18:08.480 to also creating indices and manager selection was it at 0:18:08.480 --> 0:18:12.240 the core of our consulting practice. And but we didn't 0:18:12.280 --> 0:18:17.679 have good indicase to measure the ability and the skill 0:18:18.480 --> 0:18:24.960 and remove factors from the influencing UM the alpha derived 0:18:24.960 --> 0:18:27.879 from the individual managers. So that's where the Russell indicase 0:18:27.960 --> 0:18:32.159 came from. And factor investing is still core to what 0:18:32.320 --> 0:18:34.680 we offer and do. We do it in the form 0:18:34.720 --> 0:18:38.080 of direct indexing and overlays and the like. But but 0:18:38.240 --> 0:18:43.800 that was really an important academic process but also just 0:18:43.960 --> 0:18:47.800 core to the firm being UM kind of a client 0:18:47.960 --> 0:18:52.480 centric innovative core. UM. The other parts of what we 0:18:52.560 --> 0:18:59.960 do manager selection, advice, UM, portfolio construction, assembly, risk management, 0:19:00.680 --> 0:19:05.639 implementation and execution are all now UM a part of 0:19:05.680 --> 0:19:09.119 what we do. But really how I define the firm 0:19:09.320 --> 0:19:14.480 today is an investment solutions firm. That's the only thing 0:19:14.560 --> 0:19:20.200 we do is provide investment solutions with end to end capabilities, 0:19:20.720 --> 0:19:24.880 so that we are either an extension of an investment staff, 0:19:25.480 --> 0:19:29.240 whether it's a corporate dB plan, a DC plan, sovereign 0:19:29.280 --> 0:19:33.000 wealth fund, or if you're an advisor in the wealth space, 0:19:33.480 --> 0:19:38.240 we're either an extension of your investment staff and capabilities, 0:19:38.800 --> 0:19:42.040 or we're a full outsource of your staff, which is 0:19:42.080 --> 0:19:46.480 commonly referred to as the O c i O industry 0:19:46.560 --> 0:19:51.520 or fiduciary management. So that's really interesting. The I think 0:19:52.000 --> 0:19:58.639 the average non financial professional understands UM consulting. You you 0:19:59.040 --> 0:20:01.879 want to know more about how to do something, you 0:20:01.960 --> 0:20:05.160 hire somebody with an expertise and they come in and 0:20:05.320 --> 0:20:08.360 will work with your staff to set up your four 0:20:08.400 --> 0:20:11.120 oh one K plan for the company or things like that. 0:20:12.080 --> 0:20:15.400 Tell us more about the O c i O role. 0:20:15.600 --> 0:20:19.520 How fast is that area growing? Who are those sorts 0:20:19.560 --> 0:20:23.280 of clients? It sounds like a very robust business line 0:20:23.359 --> 0:20:29.240 that the average person is probably less familiar with. Yeah, well, um, 0:20:29.440 --> 0:20:33.960 so uh the answer is yes, you you are right 0:20:34.280 --> 0:20:40.639 that people are less familiar with it. I do believe that, um, 0:20:40.720 --> 0:20:45.840 the industry is headed here quickly. So it may it 0:20:46.000 --> 0:20:52.879 may take on different terms, but allowing allowing us the 0:20:52.960 --> 0:21:02.000 industry to effectively personalize at scale in a very institutionally 0:21:02.160 --> 0:21:07.840 sophisticated manner is what I believe is the future of 0:21:07.880 --> 0:21:12.840 the industry UM and so and so people refer to 0:21:12.920 --> 0:21:15.000 it as a product. I don't think of it as 0:21:15.040 --> 0:21:18.600 a product. I think it's the core of the of 0:21:18.680 --> 0:21:21.760 the purpose of the industry and solving for client needs 0:21:21.760 --> 0:21:23.840 and so. Let me so, I'll back up a little 0:21:23.840 --> 0:21:26.680 bit and say, yes, it is one of the fastest 0:21:26.720 --> 0:21:32.440 growing segments in the asset management industry. It's called solutions outcomes, 0:21:33.040 --> 0:21:39.520 goal oriented investing. But when you choose to truly outsource 0:21:39.680 --> 0:21:44.439 the activities if it's not core to what you do, 0:21:45.680 --> 0:21:49.200 if you are you know, Boeing as a client, Uh, 0:21:49.359 --> 0:21:53.240 they are not in the business of investing, but they 0:21:53.320 --> 0:22:00.840 do have very large UM pension plans BENEF that plans 0:22:01.080 --> 0:22:07.359 for to secure their employees retirements UM and that increasingly 0:22:07.560 --> 0:22:11.439 has been an area that we've been helping, not just 0:22:11.600 --> 0:22:15.960 smaller midsize companies. It used to be that it's more 0:22:16.440 --> 0:22:21.159 the sub ten billion dollars in assets UM plans that 0:22:21.240 --> 0:22:26.880 would outsource this activity UM. But even there UM seventy 0:22:27.040 --> 0:22:32.480 I think it's over seventy of asset owners with assets 0:22:32.520 --> 0:22:36.680 up to ten billion have not yet outsourced UM. There's 0:22:36.840 --> 0:22:42.239 also an incredibly large trend which we're benefiting from. Uh 0:22:42.400 --> 0:22:46.520 we just one and will make public a mandate that's 0:22:47.119 --> 0:22:52.360 over ten billion US in the UK that has decided 0:22:52.440 --> 0:22:57.840 that they would outsource their pension scheme to Russell Investments 0:22:58.520 --> 0:23:02.439 UM and then BCG also you know tags. This is 0:23:02.480 --> 0:23:07.200 one of the fastest growing UM categories within the industry, 0:23:07.280 --> 0:23:10.520 even faster frankly than private markets, which is kind of 0:23:10.560 --> 0:23:15.320 astounding given how much private markets UM gets played in 0:23:15.359 --> 0:23:20.840 the press relative to O C I, O and and 0:23:20.840 --> 0:23:27.120 and fiduciary management. Really really quite interesting. So you mentioned 0:23:27.240 --> 0:23:31.680 factor investing earlier UM and again I think of Russell 0:23:32.359 --> 0:23:36.399 is most associated with small cap as a as a factor. 0:23:37.040 --> 0:23:40.160 Is the cheap beta story over now or is there 0:23:40.160 --> 0:23:43.919 still some juice left to be squeezed from uh smart 0:23:44.040 --> 0:23:48.280 beta factor investing, whatever we want to call it. Well, 0:23:48.320 --> 0:23:55.320 I do believe that as the industry has evolved UM, 0:23:55.359 --> 0:24:02.480 you know, factor investing has been UM very important in 0:24:02.600 --> 0:24:09.040 terms of delivering value in the form of exposures two factors, 0:24:09.080 --> 0:24:12.280 whether it be through you know e t s or 0:24:12.480 --> 0:24:17.000 passive mutual funds or direct investing. And I don't believe 0:24:17.080 --> 0:24:22.720 that's going away. UM, It's been a core of how 0:24:22.880 --> 0:24:30.520 we build portfolios for big institutions as well as for individuals. 0:24:32.320 --> 0:24:35.480 Of our business is in the wealth channel where we 0:24:36.080 --> 0:24:39.360 have advisors as our clients. So we're the number one 0:24:39.960 --> 0:24:45.000 third party third party models provider in that channel. And 0:24:45.080 --> 0:24:50.080 so I do believe that this will still be a 0:24:50.200 --> 0:24:57.560 sustainable and consistent part of how of how individuals and 0:24:58.200 --> 0:25:04.280 UM in business his build portfolio. So so Number one 0:25:04.640 --> 0:25:07.720 is it's not over. I think it's now just become 0:25:07.760 --> 0:25:13.240 a core part of portfolio construction. But I do believe 0:25:13.320 --> 0:25:16.359 I often get asked the passive versus active and the 0:25:16.920 --> 0:25:22.280 demise of the active asset management industry, and I believe 0:25:22.400 --> 0:25:27.600 that this is a continuum. The The real story is 0:25:27.800 --> 0:25:31.960 a client outcome story. The real story is the need 0:25:32.760 --> 0:25:38.040 to solve for financial resilience, financial stability. UM. The real 0:25:38.160 --> 0:25:42.240 need is about putting the clients at the center of 0:25:42.320 --> 0:25:46.800 our of our innovation to ensure that we are delivering 0:25:47.600 --> 0:25:52.800 on the goals that are quite individually driven. And so 0:25:53.040 --> 0:25:55.840 that that's what I believe the real story is rather 0:25:55.920 --> 0:25:59.840 than a cheap data story. But I don't believe that 0:26:00.160 --> 0:26:04.159 factor exposure however it is you get it within a 0:26:04.240 --> 0:26:07.199 portfolio is over by any stretch. I think that the 0:26:07.240 --> 0:26:13.000 conversation will turn more quickly with the use of technology 0:26:13.080 --> 0:26:17.040 and better hyping, which which we can talk about. But 0:26:17.040 --> 0:26:22.560 but I do believe that technology and streamlining the delivery 0:26:22.640 --> 0:26:27.800 and access points and fractionalization of shares word will drive 0:26:28.800 --> 0:26:36.280 access to factor exposures to become more scalable, uh for 0:26:36.520 --> 0:26:41.480 smaller accounts, and I believe that's a very exciting development 0:26:41.640 --> 0:26:46.360 which will deliver more value and more importantly allow us 0:26:46.400 --> 0:26:52.359 to personalize at scale using both factor exposures, which is 0:26:52.400 --> 0:26:55.960 what I refer to as data but allows you to 0:26:56.480 --> 0:27:00.840 really fine tune a portfolio for factor expos posures, but 0:27:00.960 --> 0:27:06.280 also customize for individual outcomes, whether it be income or 0:27:07.040 --> 0:27:13.439 total return or e S g UM or values based investing, 0:27:13.600 --> 0:27:17.280 things like that. And in that vein active investing is 0:27:17.320 --> 0:27:21.320 still very much alive. Yeah, I think there's a misunderstanding 0:27:21.760 --> 0:27:26.200 because half of e t fs and mutual funds are 0:27:26.240 --> 0:27:30.040 now indexed. But when you look at the broader asset 0:27:30.119 --> 0:27:34.399 management universe, the vast majority of management is still pretty active, 0:27:34.440 --> 0:27:41.159 isn't it. Well, it is pretty active, and frankly with 0:27:41.280 --> 0:27:47.320 the growth of private markets generally speaking, UM, both both 0:27:47.359 --> 0:27:52.400 credit and equity growing very quickly, right, and so you've 0:27:52.440 --> 0:27:59.520 got this this ground swell of entrepreneurial activity and private 0:27:59.720 --> 0:28:03.480 mark it's investing more generally, which I'm sure we'll talk about, 0:28:04.600 --> 0:28:10.520 but but that that growing sleeve UM has been very 0:28:10.560 --> 0:28:15.560 impactful and democratizing access to that but doing so responsibly 0:28:16.600 --> 0:28:22.080 will be another imperative for the for the industry. And 0:28:22.080 --> 0:28:27.879 and being able to drive engagement UM around d s 0:28:27.920 --> 0:28:33.400 G and also make it more customer customized around personal 0:28:33.680 --> 0:28:40.560 personal values UH necessitates UM active management. And so I 0:28:40.960 --> 0:28:44.920 believe it's it's always been an end for me, not 0:28:45.040 --> 0:28:50.920 an either or, and it's always been a component of 0:28:50.960 --> 0:28:55.000 the story about delivering client value, which is lowering cost 0:28:55.600 --> 0:29:00.800 and allowing more control of how to build portfolio construction 0:29:01.080 --> 0:29:07.080 alpha and allow for better execution ALPHA. And so I 0:29:07.800 --> 0:29:13.520 really do believe that portfolio construction assembly, tapping into all 0:29:13.680 --> 0:29:20.480 asset classes and leveraging technology for personalization at scale is 0:29:20.600 --> 0:29:24.960 the story UM of the asset management industry. But it 0:29:25.040 --> 0:29:30.120 doesn't make the factor exposure story go away. It just 0:29:30.200 --> 0:29:34.880 makes it an an instrumental part of the equation. Huh. 0:29:35.040 --> 0:29:39.640 Really quite interesting. We'll talk about E s G in 0:29:39.680 --> 0:29:42.680 a bit. I'm curious if you have any thoughts on 0:29:42.880 --> 0:29:47.320 direct indexing. We've seen Morgan Stanley and Van Gord and 0:29:47.360 --> 0:29:51.360 black Rock make acquisitions to enter that space. What are 0:29:51.360 --> 0:29:55.680 your thoughts on the concept of using software to kind 0:29:55.680 --> 0:30:02.400 of modify passive indices. Absolutely, we are all in so 0:30:02.520 --> 0:30:07.440 we do direct indexing very actively and have for quite 0:30:07.440 --> 0:30:09.960 a long time. We do it for the largest asset 0:30:10.000 --> 0:30:14.000 pools in the world. But we've also been able with 0:30:14.040 --> 0:30:18.960 the use of technology, much like UH the acquisition acquisitions 0:30:18.960 --> 0:30:23.400 that others have made in the industry, We've we've honed 0:30:23.440 --> 0:30:27.360 our capabilities to do that over time. Again, it came 0:30:27.400 --> 0:30:32.400 from the core of UH index investing in general for 0:30:32.560 --> 0:30:36.560 us UM, but that factor exposure investing, has now been 0:30:36.640 --> 0:30:39.600