Russell maintains a centralised trading platform for all trading, be it transition management or any other client directed flow. Russell executes all trades on a pure agency basis. It considers its core strengths to be the ability to source liquidity across venues in an unbiased way and the full disclosure of remuneration.
Size of transitions
Over the last year, the average size of a transition at Russell was US$825 million. This includes notional turnover for currency, derivatives and physical executions during each transition. The range of portfolio values is between US$10 million and US$9.5 billion.
The most commonly forms of hedging used are index futures to manage asset/regional/country changes, currency forwards and smart trades to manage any factor changes.
Use of crossing
Russell believes that any crossing networks, internal or external, should simply represent another pool of liquidity it can access and should not drive transition strategy.
That said, the firm’s multi-venue execution platform facilitates significant external crossing, which reduces trading costs while maintaining control of the risks within a portfolio.
Prior to the transition a detailed pre-transition cost estimate is provided. Daily updates including actual costs are offered during the transition and a post-transition report, which among other things compares the actual costs to those estimated, is provided after a completed transition. Reports are typically provided in pdf format and are available on a frequency as agreed with the client, but typically daily during an event.
Implementation shortfall is the most commonly used benchmark.
Russell always acts in a fiduciary capacity by contracting as an investment manager under an investment management agreement.