David Chaplin 's Opinion

A personal finance columnist for the NZ Herald

Inside Money: Index love drives Russell tilt

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Russell Investments could soon be in the hands of the London Stock Exchange. Photo / Wikimedia Commons
Russell Investments could soon be in the hands of the London Stock Exchange. Photo / Wikimedia Commons

Global funds management firm and index provider, Russell Investments, which has a New Zealand outpost, could soon be in the hands of the London Stock Exchange (LSE).

According to a Bloomberg report published last week, the LSE may pay up to US$3 billion for Russell, which has been shopped around by its current owners for several months.

"LSEG confirms that it is evaluating the merits of a potential transaction involving Russell and is engaged in discussions with the Northwestern Mutual Life Insurance Company, the parent company of Russell," the LSE said in a statement.

It is understood LSE is primarily interested in Russell's indexing business (that includes equity market benchmarks such as the US Russell 2000 Index) rather than its funds management arm.

LSE already operates a substantial index business under the FTSE brand but the sector has mushroomed since the GFC reintroduced the notion of risk to investors.

For example, a report by UK-based Create Research found demand for traditional unlisted index funds and the new-fangled exchange-traded funds (ETFs) has grown by about 25 per cent or more since 2009 in both the retail and institutional markets.

The Create report notes investors have "increasingly relied on traditional indexed funds and ETFs for reasons related to cost, simplicity and transparency".

Whether LSE intends to keep the Russell funds management business if the deal proceeds is unclear but a spin-off would not be surprising.

In these parts of the world, Russell is known more for its investment consultancy (advising super funds, charities and whatnot) and multi-manager products. Russell also provides the investment grunt to BNZ's KiwiSaver scheme.

Swapping owners would probably have only minimal consequences for Russell's NZ business but competitors and clients will be watching developments with interest.

A spokesperson for Russell NZ said he was unable to comment on the LSE proposed takeover.

- NZ Herald

David Chaplin

A personal finance columnist for the NZ Herald

David is a freelance journalist who has covered the financial services business on both sides of the Tasman for over 15 years. David has edited magazines and websites for the financial advice, investment and superannuation industries. Today, he contributes to various publications in Australia as well as his bi-weekly blog for the NZ Herald under the 'Inside Money' banner.

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