Asset manager Russell Investments put up for sale

Goldman Sachs hired to sell group with $293bn under management as industry consolidates

Private equity owner TA Associates has hired Goldman Sachs to explore a sale of Russell Investments, putting the $293bn asset manager on the block as part of a wave of consolidation in the fund management industry, according to people briefed on the matter.

A sale of the money manager follows several bruising years for the industry, with profits at some of the biggest fund houses squeezed by the rise of passive investing. Shares in listed asset managers have trailed the benchmark US stock index, the S&P 500, over the past five years.

Russell Investments was last valued at $1.15bn in 2016 when TA Associates acquired the group from the London Stock Exchange. It is unclear how much TA is seeking for the Russell, which claims to have invented the first so-called smart beta strategies with the creation of small capitalisation, growth and value investing funds more than three decades ago and runs multi-asset, equity, fixed income and alternative funds.

The growing pressure on fees from passive investing has forced a number of active managers to consolidate in recent years, including the £11bn merger between Standard Life and Aberdeen Asset Management, the $6bn combination of Janus Capital and Henderson Global Investors and Invesco’s purchase of rival OppenheimerFunds for $5.7bn. Dealmaking has been concentrated this year between smaller fund managers that have sought to unite to build scale and fend-off larger rivals.

Russell and TA Associates did not immediately respond to a request for comment. Goldman declined to comment.

Seattle-based Russell brought in Michelle Seitz as chief executive two years ago from the much smaller William Blair Investment Management. She has since focused on controlling costs.

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The asset manager also operates a large investment outsourcing unit that works with companies and non-profit organisations to structure their retirement and investment programme portfolios, conduct due diligence on money managers and assist with compliance. The company counts aircraft manufacturer Boeing, telecoms group AT&T and the Union Pacific railroad among its clients.

Fund managers have watched as the fees they can charge clients have steadily been eroded in the last two decades, with investors paying roughly half as much to own a US mutual fund or exchange-traded fund in 2018 as they did in 2000, according to fund-rating group Morningstar.

TA Associates, which specialises in management buyouts, has taken part in more than 20 deals involving asset managers, including DNCA of France, Söderberg Partners of Sweden and Jupiter Fund Management in the UK.

Two years ago it paid £600m to acquire a majority stake in Old Mutual Global Investors in a management buyout spearheaded by the UK fund manager Richard Buxton. OMGI last year rebranded as Merian, and Mr Buxton has since stepped back from running the business.

TA Associates backed a management buyout at Jupiter from Commerzbank in 2007 and listed the business three years later.

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