Russell Changes Allocations in Some Products

These products include the Russell LifePoints Funds, Target Portfolio Series and Russell Core Model Strategies. The primary changes include shifts in the fixed-income, U.S. equity, international equity and alternatives asset class allocations, according to Russell. For most portfolios, the reallocations take effect during the month of January.

“Our investment strategists are forecasting an environment of modest returns through 2014, which can be challenging for some investors in achieving a desired rate of return at a level of risk they are comfortable with,” says Jeff Hussey, global chief investment officer at Russell, who is based in Seattle. “Despite a lower-return environment, our outlook is not pessimistic and we see promising opportunities for many investors maintaining diversified, multi-asset portfolios with global exposure.”

The perspective of Russell’s team of global strategists is outlined in its recently released 2014 annual global outlook report, which highlights the firm’s expectations of modest global growth that should see equities outperform cash and fixed income, despite some expected market volatility.

“Many investors and financial advisers are struggling with the best way to approach U.S. core fixed income in an environment in which we expect interest rate increases,” says Phill Rogerson, managing director of consulting and product services for Russell’s U.S. adviser-sold business. “While we believe fixed income remains an important element of a diversified portfolio, we feel the time is right to implement a modest decrease in core fixed-income exposures and an offsetting increase to equity and high-yield bond exposures that may benefit investors’ long-term investing goals with a commensurate increase in risk.”

The specific portfolio reallocations include:

• Fixed income. Reallocating assets from core bond exposures (Russell Strategic Bond Fund and Russell Investment Grade Bond Fund) to equities and global high-yield bonds that represent a better return potential with corresponding increase in risk.
• U.S. equity. Increasing overall exposure to U.S. equity, with a majority of this increase going to the small-capitalization equity allocation, in an effort to compensate for the lower return expectations of fixed-income markets.
• International equity. Taking a more targeted approach to non-U.S. equity exposure with an emphasis on emerging markets and adjustments within global equity allocations.
• Alternatives. Changing the real asset composition by decreasing commodities and increasing infrastructure allocations in an effort to maintain non-U.S. exposure levels while also offering higher return potential.

“We believe that strategic asset allocation is one of the primary determinants of investors’ progress toward their desired outcomes,” said Rogerson. “The changes we are making to our products reflect Russell’s best thinking and our commitment to providing investment solutions that are broadly diversified, implemented utilizing some of the world’s leading money managers and strategies, and dynamically managed to reflect the realities of changing global market conditions.”

More information about these changes is available in an online video featuring Phill Rogerson.

The “2014 Annual Global Outlook” report can be downloaded here.