Business

Can Russell Investments take on Cambridge Associates in the family office sector?

Global investment solutions provider Russell Investments, best known for providing advice to institutions, is developing plans to offer services to family offices and wealthy individuals.

Russell, backed by private equity firm TA Associates, advises on assets worth $2.5 trillion and directly manages $330 billion. As part of its drive into wealth, it has appointed Gavin Anderson as private markets director from Chroma Ventures, an investment office based in Dundee whose sponsor, 4J Studios, developed Minecraft, a renowned computer game, for a range of platforms. 

Russell Investments was begun as a family business by Frank Russell, in 1936. His grandson George Russell, turned it into a successful pension consultant built on a single contract with JC Penney, keeping its head office in his beloved Tacoma, Washington

His arrival follows news of Russell’s strategic partnership with Mario Giannini’s Hamilton Lane, which generates private market opportunities for individuals plus a joint-venture with Italy’s Mediobanca, a frequent advisor to wealthy families. 

To develop new ideas, Anderson will work with Russell’s senior private markets director Michael Steingold. Chris Davies, head of UK distribution at Russell, said: “We are seeing increased demand for private market assets in sophisticated investors’ portfolios, particularly from wealth managers, family offices and private banks.”

Russell Investments was begun as a family business by Frank Russell, in 1936. His grandson George Russell, turned it into a successful pension consultant built on a single contract with JC Penney, keeping its head office in his beloved Tacoma, Washington. Russell developed index construction with the Russell 2000, performance measurement and portfolio diversification. He also demonstrated how consultants can bolt together enormous books of fee income from institutional clients who come to rely on their wisdom.

George Russell sold the business in 1998 for $1.2 billion to Northwestern Mutual who resold it for $2.7 billion in 2015.  He and his wife Jane went on to develop a new family business, known as Threshold Group, which specialised in impact and ESG investing. By 2017 it looked after $3.4 billion. The Russells agreed to sell it to Tiedemann Wealth Management but kept a minority share stake.

Today’s leading investment solutions provider to family offices is Cambridge Associates, a strong backer of venture capital and private equity. To its credit, it has consistently recommended that its clients should allocate 40% of their portfolios to private assets if they want to outperform.

Access to private asset deals, preferably through co-investment, is key to winning business from family offices, along with ideas to manage downside risk. But they are reluctant to pay fees for advice to the same extent as institutions and consultants have found it hard to break into the sector. 

Like Cambridge, Russell is taking an upbeat stance on private assets which have outperformed global markets in 19 of the last twenty years partly because they are less volatile and can offer a premium return. 

Russell is developing private equity, private debt, real assets and venture capital products with Mediobanca. Hamilton Lane, which manages $850 million in deals and funds, bought a $90 million stake in Russell, as part of their transaction.

Gavin Anderson was investment director at Chroma Ventures, building on experience in the investment sector, prior to which he had experience in alternatives in asset management and accounting.

Chroma is led by 4J founders Paddy Burns and Chris van der Kuyl. They are prepared to invest between £500,000 and £5 million in ventures in Scotland, and beyond, in sectors like computer games and augmented reality. They like to invest in businesses for the long term and frequently serves on their boards. 

Chroma is a backer of Stormcloud, built by games veteran Frank Arnot, a 4J co-founder, where van der Kuyl serves as chairman and Burns is a director. 

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