Finance minister Katy Gallagher has confirmed that she held informal talks with the sovereign wealth fund’s Board of Guardians amidst speculation its mandate could be changed to align it with the transition to net zero.
New Zealand’s sovereign wealth has set its future 20-year rolling returns forecast well above the risk-free rate but below the annualised 10 per cent it achieved in its first two decades of operation.
Gunning’s new job amid Russell bond shake-up
Russell Investments has made sweeping changes to its flagship global fixed income funds in a move that almost doubles the in-house managed component.
In a note to clients last week (May 4), Russell revealed it had cut three incumbent bond managers – Colchester Global Investors, Insight and Voya – from the global fixed income menu while awarding Western Asset Management a new mandate in the strategy.
The move was separate from a head-office tidy-up, announced in the US last week, which sees Peter Gunning, the Asia-Pacific head and global chief investment officer, switched to new dual roles as vice chair and strategic relationships officer.
Gunning, a 25-year Russell veteran appointed as temporary global CIO in 2018, will continue to report to the firm’s chief executive, Michelle Seitz, in his new job that involves “deepening the firm’s relationships with key clients while embracing responsible investing practices”, according to the statement.
“Gunning will also work to ensure that Russell Investments’ global client base can seamlessly leverage the firm’s exceptional open-architecture investment solutions.”
Former Goldman Sachs deputy chief investment officer, Kate El-Hillow, replaces Gunning as Russell’s global CIO, while ex Morgan Stanley chief operating officer, Kevin Klingert, has “been hired as president”.
Meanwhile the shake-up in the Russell Global Bond and Global Fixed Income funds saw an increased allocation to remaining third-party managers, Schroders and BlueBay.
Russell also took on extra duties in the fixed income products with the in-house exposure rising from 18 per cent to 33 per cent under the new arrangements.
Previously, Russell ran strategic overlays on government bonds comprising 15 per cent of the total multi-manager pie and a 3 per cent allocation to liquidity strategies, which moved to 14 per cent and 5 per cent, respectively, under the changes announced last week.
But the manager has taken on a new ‘intelligent credit strategy’ in the revised fixed income approach that represents 14 per cent of the overall portfolio.
BlueBay saw its share of the global bond funds rise to 26 per cent (from 19 per cent) while the Schroders weight increased to 13 per cent (up from 10 per cent): Western assumes 28 per cent of the Russell portfolio weight.
The Russell note says the fixed income fund restructure follows a decision to create “more separation between strategic factors biases and pure manager alpha”.
“Strategic factor exposures will be implemented through Russell Investments’ positioning strategies, while manager alpha will be harnessed through specialist active managers with more targeted investment mandates,” the note says.
According to Russell, its research shows long-term global fixed income “excess” returns depend on harnessing four essential components: strategic factor biases; manager skill (true alpha), model-based security selection factors (positioning strategies); and, tactical management.
“We have always sought to identify managers whose investment strategies generate excess returns that are not easily explained by factors and can therefore be considered manager skill,” the note says. “With this in mind, we made the decision to remove generalist fixed income managers, Voya, Colchester and Insight, from the fund’s manager line up and introduce credit specialist, Western.”
Russell appointed the US-based Voya (formerly operating under the ING brand) to the global fixed income line-up in 2019, although Insight and Colchester had served much longer stints.
Last month the UK sovereign bond specialist, Colchester, launched a stand-alone portfolio investment entity fund in the NZ market.
The global fixed income portfolio re-jig, completed in April, coincided with a raft of senior management changes in the Seattle-headquartered Russell.
Klingert will be responsible for the Russell operational functions following the exit of chief operating officer, Rick Smirl, at the end of April. Smirl joined US boutique manager, Virtus Investment Partners as COO early in May.
Also in recent weeks, Sasha Mandich, who held senior sales roles with Russell in NZ and latterly in the UK, was hired as head of business development for London-based consulting firm Cardano. Separately, long-time Russell NZ chief, Alister van der Maas, resigned early in May with his duties to be shared in the interim between local head of institutional, Matthew Arnold, and Australia managing director, Jodie Hampshire
