Investment consultancy firm and fund manager, Frank Russell has teamed up with Société Générale Asset Management (SGAM) to launch a US small cap equity fund aimed at European institutional and retail investors.
The fund will invest in small to medium-sized US companies within the Russell 2500 index and will offer a separate class of share for SGAM's institutional clients, but not yet for other investors. SGAM will be distributing the fund mainly to its French customer base, but there might be some exceptions" says Charles de Cidrac, head of institutional marketing at SGAM in terms of offering the fund outside of France.
Included in its clients will be French pension schemes who will have the opportunity to invest in the fund: "It will be targetted_at all types of institutions. So this in-cludes insurance companies, mu-tuelles and caisse de retraites."
SGAM chose Frank Russell because of the lack of experience among French managers in the asset class. "The idea was to launch a product in an asset class where we do not have a present expertise and where we thought the best way of managing money was to have outside fund managers because we didn't have that expertise", explains Cidrac.
He continues: "Of course we could have hired one, but we believe it was better to find the best in the industry." Russell was selected for its ability to pick the best managers, which SGAM did not feel qualified to do: "We needed to select managers, which is not our job. Our job is to manage the money and not to select managers." Barclays Global Investors, Fiduciary Trust and WestPeak Investment Advisors, have been selected to manage the assets of the fund via the "multi-style, multi-manager" structured approach developed by Russell and utilised in the US since 1980. Russell's multi-manager funds, which now total $30bn in assets under management worldwide, operate under the concept of selecting the best performing managers in a given asset class, with different styles to deliver high returns with substantially less risk involved.
Alison Ramsdale, director of portfolio management at Frank Russell in London explains: "The concept is really one of diversification which is that if you can find managers with different styles, their performance patterns tend to be uncorrelated, so that at the total fund level, the risk and the volatility in terms of performance is much less than what you would get with a single manager.""