Russell Investments ‘focused on resilience’: CEO

Russell Investment chairman and CEO Michelle Seitz discusses her firm’s recent strategic partnership with Hamilton Lane to accelerate private markets capabilities, as well as current market conditions and her outlook.

Video transcript

MYLES UDLAND: And let's stay on the markets and talk about some of the changes that Russell Investments is seeing in its business, some of the initiatives that it's planning as it goes forward here. Michelle Seitz joins us now. She's the chairman and CEO over at Russell.

Michelle, thanks for joining the program. I want to start with something that you guys have been working on that you're framing around the democratization of markets theme. And we have seen so many retail investors come into the market-- so many people kind of pay attention to their investments for the first time. You guys are looking at making some areas of private markets more accessible. How are you seeing these trends kind of play out again, given the very unique environment we found ourselves in over the last 18 months or so?

MICHELLE SEITZ: Wonderful. Well, thank you for that introduction. And, Myles, great to join all of you again. So first of all, proudly, we're celebrating our 75th anniversary. And so managing institutional assets as well as the retirement assets of individuals around the globe is nothing new to us.

But your comment about democratizing is critically important, because what we want to make sure we do and we're a means to an end of providing for people's financial security-- the guest prior to me talked about resilience, both in the financial system, the US economy-- we want to do the same for individuals around the globe. And so as we think about democratizing with changing market environments, we think about access to private markets, which is one of the fastest-growing asset classes around the world.

And that was the root of our reason for forging the strategic relationship with Hamilton Lane, which is a 30-year premier provider of private market solutions. And then also, we manage money for the biggest institutions around the globe, whether those be defined benefit or defined contribution plans, sovereign wealth funds. And what we want to do is that advisory capability that we have to over $2.5 trillion around the globe.

We want to make sure that those sophisticated institutional risk allocation capabilities find their way both through access, as well as responsible investing to individuals to make sure that they, too, are as resilient as the Fed is trying to make our economy.

JULIE HYMAN: I noticed that you said responsible investing, of course. And it's so interesting to hear you talk about, Michelle, democratization of investing, which is a buzzword that we've heard a lot from the Robinhoods of the world, right? And Russell is a very different entity from a Robinhood. So when you're thinking about democratization, how are you also thinking about it with regards to risk?

Because I think that in some cases, or at least when we've seen it enacted through the Robinhoods of the world, it's sort of gone hand-in-hand with individual investors wanting to take on more risk and being able to do so. How are you thinking about that question?

MICHELLE SEITZ: This is-- thank you, Julie-- this is all about responsibility. Certainly, you want to give access, but you want to give access in a responsible manner and make sure that individuals and institutions are equipped to manage in a fiduciary manner the assets that are entrusted to them. And so I want to keep coming back-- this is real money.

There are speculative bubbles that take place, and I'll do a quick little vignette. I was looking for a Mother's Day gift for my mother in a Home Depot, and my son called, who's 21 years old, and he I wanted to know when to get out of his digital currency and whether or not he should do it ahead of an "SNL" segment. And we had a conversation in the middle of the plants where I was shopping that this is akin to legalized gambling.

I just wanted to make sure that he understood that he could lose all of this money as quickly as he made it. And he did understand that. So I appreciate that there's a fascination with the quick money that can be made, but the money can be lost quickly as well. And that is not the business of asset management professionals.

That is not our business. Our business is to responsibly allocate capital and to responsibly invest capital for the financial resilience and the health of end individuals around the globe. And it's a critically important problem to solve for. I talked before about the gap that exists is greater than the GDP of some countries, and ours too, in terms of being able to meet the liability needs of individuals.

And so responsible access is just as important, if not more important, than democratized access. And the point there is not just the access to invest in individual securities at a price point that's appropriate, but it's also to make sure that there is risk allocation and that the right kinds of investments are being made on behalf of individuals.

BRIAN SOZZI: Michelle, I think your example-- your Home Depot example echoes what Cleveland Fed President Loretta Mester was just talking about before you-- that valuations, perhaps, are a little too high. What's your take on equity valuations and also private market valuations?

MICHELLE SEITZ: Sure. Well, this is a market environment where the overall indices belie what's really happening underneath. And this was very true-- I've been in the business for quite a while, so over 30 years-- but this is very true of and was very true of the tech bubble of 1999, and then the concurrent rotation in 2000 and 2001. But it's emblematic of talking about things in general without talking about the detail.

And what you'll find underneath the detail of the indices are some things being priced to perfection. And 42% of GDP is where we stand right now with liquidity that's been pumped into the system, both monetary as well as fiscal. And that's a lot of money. It's a lot of money, and it hides a lot of mistakes underneath the covers.

And there are mistakes in pricing. And so you see that in the rotation that's taking place. But the good news is that fundamentals are catching up to the price appreciation that's taken place over the last year. What's been left behind are the more cyclical stocks where earnings are up year over year close to 70%, and the overall market, the S&P 500, is up 50% in terms of earnings expectations.

And so you're seeing big rebounds in earnings. That's really good. You're seeing bigger rebounds in cyclical stocks, which is called the value sector of the market. And so this is a time-- I know there's always the debate between passive and active-- there's a place for both. And right now, I think this is where active can make a big difference in portfolios. And professional advice in a responsible way can also set you up for success over the long-term.

MYLES UDLAND: All right, Michelle Seitz, Chairman and CEO at Russell Investments-- Michelle, thanks so much for joining the program this morning. Great to get your thoughts. I know we'll talk soon.