(Adds details on Russell’s mutual funds performance)
By Jessica Toonkel
NEW YORK, Jan 7 (Reuters) – Northwestern Mutual Life
Insurance is exploring a possible sale of its Russell
Investments asset management business, which has $247 billion in
assets under management, according to four people familiar with
the situation
The Milwaukee-based insurer is discussing selling the
Russell subsidiary because it has decided it is not a core part
of its business, the people said on Tuesday.
All of the sources wished to remain anonymous because they
are not permitted to speak to the media.
A Northwestern Mutual spokeswoman declined to comment.
Seattle-based Russell provides pension consulting,
investment management, transition management services and
indexes such as the Russell 1000 Global Index.
If the firm decides to go ahead with a sale, it is unclear
if the business would be sold in its entirety or broken up, two
of the sources said.
It could not be determined how much Northwestern would
receive if it decides to sell the firm. Northwestern bought
Russell, which was then called Frank Russell Company, in 1999
for $1.2 billion.
Russell’s roots date back to 1936 when founder Frank Russell
established a brokerage firm in Tacoma, Washington. Over the
years it has grown as a consultant to pension plans, provider of
asset management and in 1984 it introduced its own indexes.
Today Russell’s indexes have $4.1 trillion in assets benchmarked
to them, according to Russell’s website.
Russell would not be alone in selling its index business.
Barclays Plc is also exploring a sale of its index
business, sources have told Reuters.
Given the growing popularity of index-based funds and
exchange-traded funds, firms like Barclays and Russell could
obtain a good premium for selling their index businesses,
sources said.
In the first 11 months of 2013, investors poured $279
billion into index-based funds and ETFs, almost double the $146
billion they invested in actively managed funds and ETFs,
according to fund researcher Morningstar Inc.
Russell and many of its peers encountered hurdles during the
2008 financial crisis. That year, the firm shut down its hedge
fund of funds operation. Russell’s money market funds had more
than 5 percent exposure to securities of Lehman Brothers
Holdings Inc, which went under in 2008. As a result Northwestern
Mutual put $764 million into those money funds to protect
investors.
In 2010, Russell sold its private equity manager, Pantheon
Ventures, to Affiliated Managers Group for $775 million.
In 2012, Russell closed its 25 ETFs because it failed to
garner significant assets after being in the market for little
over a year.
However, Russell’s mutual funds appear to have had a good
2013. The firm’s funds saw $326.5 million in net inflows in the
first 11 months of 2013 after seeing $1.48 billion in outflows
in 2012, according to Morningstar.
(Reporting by Jessica Toonkel; Editing by Matthew Lewis and
Kenneth Maxwell)
