Russell Investments is a 90-year-old asset manager with a deep history in retirement investing. But its new owners think the firm needs a technology makeover to serve modern clients better. They plan to use artificial intelligence to build more customized portfolios.
The buying group is led by B Capital, a venture firm co-founded by Eduardo Saverin and Raj Ganguly. The California Public Employees' Retirement System, or Calpers, is also part of the group. Calpers is a large public pension fund that invests money for government workers. Together they are paying $2.8 billion for Russell Investments.
Reverence Capital Partners and TA Associates Management, both private equity firms, are the sellers. They took Russell Investments private about a decade ago for $1.15 billion. Back then, the firm managed roughly $270 billion in assets.
Now it manages $416 billion. B Capital received exclusive advisory services from Jefferies LLC for this transaction. Moelis & Co and Bank of America advised Russell Investments.
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Raj Ganguly, co-founder of B Capital, said the investment is about using AI to improve how people save for retirement. "We've always believed that the way that people save and invest for retirement can be improved by leveraging AI. "But you can't remove the human element from it"," he said.
Anton Orlich, Calpers Deputy Chief Investment Officer, called the deal "a compelling opportunity to build a next-generation asset manager." The buyers saw that many investors feel their retirement needs are not well served. Instead of backing a new startup or robo-advisor, they chose to buy an established firm with long-term client relationships.
Zach Buchwald, CEO of Russell Investments, explained that the firm does not see itself as a competitor to most asset managers. "In many respects, we're not so much a competitor to the other asset managers as a partner. We look for best of breed managers in every part of the ecosystem and we use them as we build portfolios," he said.
To build client portfolios, Russell Investments often collaborates with outside asset managers and integrates their funds. This approach helped the firm achieve organic growth of more than 15% over the past two years. Organic growth means money from existing clients, not from buying other firms or market gains.
Kate El-Hillow will stay on as Chief Investment Officer after the deal closes. The new owners plan to spend more on technology to create more personalized portfolios. Buchwald added: "When we think about our bigger aspirations that could really move the needle for the company in terms of the clients that we serve, "we're going need to think differently around technology and marketing and how to engage with these clients"."
Regulatory green lights are required, and the deal is projected to be completed early next year. If it goes through, Russell Investments will continue to run independently with its current CEO and CIO. The big change will be more spending on technology, especially AI, to tailor portfolios for individual investors. Calpers and B Capital are betting that a 90-year-old firm can learn new tricks.
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